The True Wealth of Inheritance: Cash Flow and Opportunities

Turns out, inheritance data explains US socio-inequality and the calcification of wealth.

We often hear that the Middle Class is shrinking and the American dream is dead. The truth is that the world is growing more equitable in comparison to the 1950s American lifestyle. However, even though those expenses are going up, one group retains the advantage.

According to Cerulli Associates, the Silent Generation and Baby Boomers will pass down nearly $84.4 trillion in assets by 2045. Of that, $72.6 trillion will go directly to heirs. That’s a lot of money and a great counterbalance to mounting debt.

So what is the real value of this transfer in one’s lifetime? And, what do you do if you aren’t in line to inherit this generational wealth (Great Reset)?

Those Who Have Will Pass Wealth Down to Those Who Have

Baby boomers own half of the nation’s $156 trillion in assets despite making up 21% of the country’s population.

Over 1 in 5 US households received an inheritance, according to the 2022 Federal Reserve’s Survey of Consumer Finances. The average American inherited nearly $60,000. While the majority will inherit zero or debt, those who will receive this windfall can expect around $266,000.

White Americans are about three times more likely to inherit than their Black, Hispanic, or Asian friends. In addition, the median White family has more than six times the net worth of the typical Black American family.

But a rich kid’s true inheritance goes far beyond cash value: In a million less-measurable ways, elite parents give you a head start in life. By the time they die and hand you a windfall, you’ve already used all your advantages to accumulate wealth of your own.

Up and down the demographic charts, it appears to be a case of to whom much is given … much more is given.” Check out the article from the Washington Post.

How is wealth calcified?

The biggest advantage of wealth is intro-vivo. That which you can provide while you are living. For example, the wealthy live in primarily high-income areas which generate more economic activity. On top of that, these locations pull more taxes which fuels local schools. Check out this video of the best high schools in the US.

These schools offer a more targeted approach to learning, better teacher-to-student ratios, and a myriad of extracurricular activities. To boot, wealthy families opt to give their kids more soft skills and tutoring which gives them an edge on their future competition. To make matters worse, homes in higher-income areas often grew in value by as much as 5x in comparison to lower-income areas.

“When the housing market crashed, owners of the least valuable homes were especially hard hit, and lost more home value than homeowners at the upper end of the market,” Zillow senior economist Aaron Terrazas said in a release. “Since then, though, demand for less expensive, entry-level homes has built steadily, causing prices to grow rapidly. As a result, these homeowners have been able to build wealth at a faster pace than owners of more expensive homes.” 

Beyond Cash Flowing Wealth through an Inheritance

To scale from Working to upper class, cash flow management is key. The wealthy accomplish this with access to professionals. When you hear that Trump didn’t pay taxes, for one, it’s tax avoidance, and two, it’s likely his team of accountants doing the work.

The rich pay for the labor, in favor of time. For example, most people don’t understand that they have to do tax mitigation strategies in order to retain their dollars. As an extension, most don’t understand how significant it is to invest today to grow their wealth. The benefit here is time. If you can make more money per hour vs outsourcing it, it’s a better use of your time. The rich have better networks and trusted resources at their disposal. As such, the wealthy inheritance provides for social networks and upward mobility.

This is the difference between trying to get into a college of your choosing or knowing you will be attending this specific college or university. Think of these as multigenerational super highways to higher-paying jobs and long-term success.

So what do you do if you don’t have an inheritance?

Well, to put it simply you have to hustle. While you can’t pick and choose who you are born to, the next best thing is to plan for ways to adopt social processes to attach your cart to the highway.

How do you do this? It all comes down to your pursuit of knowledge. One drawback to wealth is that life comes easily and solutions come from money. If the car breaks down, buy a new car. If you don’t like the location of your home, buy a new home. For those who inherit money, life is solved by money. For those who don’t, life is solved by creativity.

If you aren’t getting a six-figure income, remember these four things. Attain an education or certification in a high-paying field. Work on your soft and technical skills such as public speaking, sales, branding, and networking. Use cash flow management to limit your tax liabilities. And finally always invest in the future.

Unlike other people, you won’t have the luxury of a do-over, so make a plan and stick with it. Every move must be measured and calculated. You have to outplay your competition. If they aren’t as hungry, make up the difference in vigor and stamina.

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