US$3 trillion inheritance expected in Asia over next 30 years: report

Singapore

ASIA'S ultra high net worth indivi-duals (UHNWIs) are expected to transfer US$3 trillion to the next generation in the next three decades, a joint report by Wealth-X and National Financial Partners Corp said on Tuesday.

Malaysia, Taiwan and Japan are among the top five places in the region with the largest proportion of wealth transfers over three decades compared to their total UHNW wealth in the country. They are expected to pass down around 70 per cent of the total UHNW wealth in their respective economies to the next generation.

This is partly due to the fact that in each of these economies, some of the wealthiest billionaires are already in their 70s or 80s, and this has a disproportionate impact on the whole country, the report said.

The wealth applies only to the current value in assets, so it doesn't take into account the ensuing gains or losses on the eventual inheritance over the next three decades. No inflation projections were also embedded.

In Singapore alone, UHNWIs will pass on US$110 billion to the next generation in the next 30 years, Wealth-X data shows. By comparison, Hong Kong will have its UHNWIs transfer US$375 billion to the next generation in the next 30 years, or more than three times that in Singapore.

For both Singapore and Hong Kong, the transfer in 30 years' time will represent about 60 per cent of all UHNWIs' wealth.

Globally, US$16 trillion of UHNW wealth is expected to be transferred to the next generation - with nearly 40 per cent coming out of the United States, where the largest number of UHNWIs live.

Meanwhile, there is US$6 trillion of wealth accumulated primarily via the ownership of privately held businesses that is due to be transferred to the next generation. Of this, 20 per cent, or US$1.2 trillion, is sitting in Asia.

"A significant number of heirs of UHNW individuals will not want to take over the responsibility of running these companies on a day-to-day basis," the report noted.

"This will lead to large opportunities for sales and public offerings of these companies, and ultimately to the release of even more cash for investments and spending by the next generation."

Wealth-X cautioned of the impact from inheritance taxes, which stand at 50 per cent in Japan and 40 per cent in the US. China, though, charges no such tax.

"UHNW individuals must factor in the potential cost of transferring their wealth to the next generation, " the report said. "The use of favourable jurisdictions to transfer assets helps ensure UHNW individuals are in control of the entire process."