Gen Z is More Likely To Give Away Some Inheritance To Help Others

Research predicts that millennials are due to hold five times as much wealth as they do today by 2030 as they're estimated to inherit over $63 trillion from boomers.

But younger generations are more likely to agree with an increased inheritance tax if it would reduce overall economic inequality.

An exclusive poll for Newsweek by Redfield & Wilton Strategies has revealed that 51 percent of Generation Z would support an increased inheritance tax.

Scott Israel, CMFC, AIF partner, senior wealth management advisor for Legacy Edge, explained how inheritance tax currently works: "There is a Federal Estate Tax and in many states there is also a State Estate Tax. For 2023 the exemption amount for the Federal Estate Tax is $12.92 million per individual. For assets over that threshold, the tax rate will vary from 18 to 40 percent," Israel told Newsweek.

"For example, if someone inherits $100,000 beyond the Federal Tax Exemption, the tax liability could be anywhere between $18,000 and $40,000, depending on size of estate, and typically the tax will need to be paid within 9 months from date of death," he added.

But while some inherit huge amounts from family, wealth inequality is still on the rise in the U.S. According to federal statistics in 2021, the top 1 percent held a record 32.3 percent of the country's wealth, while the bottom 50 percent only held 2.6 percent.

The 2020 COVID-19 pandemic further intensified economic inequality. Over the course of the pandemic, the richest 1 percent reached a record 45.9 trillion dollars in assets at the end of 2021, with fortunes increasing by more than 12 trillion dollars during the course of the pandemic.

In a poll of 1,500 U.S. adults conducted in April 2023, an equal amount of respondents either supported or opposed a higher rate of inheritance tax, 32 percent for each. Some 23 percent had no opinion either way.

While those in Generation Z are less likely to redistribute wealth among family members when it comes to inheritance, they do appear to want to redistribute wealth across wider society.

When asked if they would be prepared to pay a higher level of inheritance tax to combat wealth inequality, those in Gen Z keen on the idea.

Of 18-24-year-olds, 23 percent said that they strongly supported a higher inheritance tax, while a further 28 percent said that they would support it. A total of 27 percent said that they had no opinion either way, and only 16 percent opposed higher taxes.

Older generations, however, were less likely to back a higher inheritance tax, even if it would mean greater wider equality.

Respondents aged 25-34 did mostly support a rise, but not as universally as their younger counterparts. Around 39 percent said they would support higher inheritance tax, 30 percent offered no strong opinion and 19 percent opposed the idea.

Similarly, older millennials and those edging into Generation X, aged 35-44, were supportive but considerably less so than Gen Z. Some 40 percent said they would support an inheritance tax rise while 20 percent were opposed.