Wealth & assets· Tax· Intergenerational Centre The million dollar be-question: inheritances, gifts, and their implications for generational living standards 30 December 2017 Laura Gardiner This report assesses the role that intergenerational family transfers – inheritances and gifts – will play in addressing the generational living standards challenge that Britain faces. Nowhere is this challenge clearer than in relation to home ownership and wider wealth accumulation for today’s younger generation, so the future flow of assets down generations appears an obvious potential avenue via which the current situation can be ameliorated. Considering the millennial generation as a whole, it’s clear that the large sums of wealth held by older generations will provide a major boost to younger generations’ living standards in years to come. Inheritances are set to more than double over the next two decades and peak in 2035, as the generally high-wealth baby boomers progress through old age. And a greater share of young people today are likely to benefit from intergenerational transfers of wealth than did in the past, driven by fast-rising home ownership rates for today’s older generations compared to predecessors. However, future intergenerational wealth transfers are by no means the solution to the low home ownership rates and wealth accumulation challenges today’s younger generation faces. Even with the potential for more widely-spread wealth transfers, nearly half of 20-35 year old non-home owners have no parental property wealth, making it unlikely that they will receive the kind of transfer that would support them to own themselves in future. Even those who can expect to get a share of parental property wealth will inherit too late to use this to support living standards during the expensive child-rearing stage, with the most common age at which 20-35 year olds might expect to inherit standing at 61. And the transfer of parental property wealth to 20-35 year olds would vastly increase absolute wealth differences within this group, making it harder still for individuals to earn their way towards being wealthy, as opposed to getting there on the basis of their parents’ wealth. The fact that people tend to couple up with partners who have similar inheritance expectations to their own only serves to amplify these gaps at the household level. On this basis, there is a need to assess how policy can support wealth accumulation within younger generations and temper the role of intergenerational family transfers in driving up absolute wealth gaps. With the overall value of intergenerational wealth transfers set to grow rapidly over coming decades, now is the right time to be thinking about these issues. As such, forthcoming policy papers for the Intergenerational Commission will consider these and other policy areas in forming recommendations for a renewal of the intergenerational contract in Britain.