Quebec would have entered into the largest intergenerational transfer of wealth in its history. The phenomenon remains surrounded by a lot of unknown, but we know that it did not wait for the death of the main stakeholders to start and that it risks mainly benefiting the richest.
At the end of 2023, Quebecers aged 65 and over held a net worth totaling almost 1,000 billion, according to Statistics Canada. That was three and a half times more than 25 years ago, even taking into account inflation. We obviously hope that these people will benefit from their real estate and financial assets accumulated over the years for as long as possible, but this also suggests a large transfer of wealth to the generations that follow them.
This situation is not unique to Quebec. The insurance and financial services company Sun Life also spoke last fall of “the largest transfer of wealth from one generation to another in Canadian history.” Exactly the same words were used in the United States as well as in several other economies.
The phenomenon is attributable to a combination of factors, experts say. There is first a demographic aspect, the mass of baby boomers, born between 1946 and 1965, today between 59 and 78 years old. There is also the fact that this generation has had fewer children than its parents, that it has experienced fairly good periods of economic growth and that it has benefited, in recent decades, from a marked increase in the price of houses and financial assets.
A novelty in Quebec
In Quebec, these factors were reinforced by other changes, including those enabled by the Quiet Revolution which opened the economic horizons of a French-speaking population with hitherto more modest incomes and assets.
“30 or 40 years ago, having substantial wealth to bequeath was still largely reserved for an economic elite in Quebec,” observes Maude Pugliese, professor and holder of the Chair in financial experiences of families and wealth inequalities. at the National Institute of Scientific Research. “It’s a new thing for us. »
Unfortunately, statistical data that would allow us to get a precise idea of the extent of the current and future wealth transfer are rare, explains Pierre-Carl Michaud, professor and scientific director at the Institute on Retirement and Savings. at HEC Montreal. “I wouldn’t know how to properly measure legacies at the moment. We don’t really have reliable data. »
Even the simple measurement of the wealth accumulated by certain segments of the population is difficult to do, particularly for the 1% or 0.1% of the richest due to their small number and the sometimes vague and shifting nature of their assets, explains the economist. “For the very rich, we often have to turn to unofficial sources such as the rankings of the great fortunes of the magazine Forbes. »
And for everyone else, the few figures we have do not always take into account all the factors, such as the monetary value of the pension plans that people can count on when they retire. “However, it is likely to affect a much broader base of the population and it can quickly represent a lot of money. The market value of a 55-year-old police officer’s retirement fund is worth millions. »
According to Statistics Canada, the value of private pension plans on which Quebecers aged 65 and over could count represented more than 40% (or $267 billion) of the approximately $643 billion in net worth they held in 2019. Principal residence and other real estate came second with 33% (or 210 billion), followed by financial assets excluding pensions (17% or 106 billion) and the value of their shares in their own companies (less than 8% or 49 billion ).
An unevenly distributed jackpot
However, this jackpot is not equally distributed. Logically, it is higher as we age and build wealth. Then, it begins to decrease once you reach retirement and draw on your reserves.
It is also concentrated among the richest, the 10% of Quebec families with the highest assets in 2019 reported having a median net worth of almost 2 million. This was twice the wealth available to the next segment of the richest 10% (1.03 million), who themselves had double the number of Quebecers in 7e decile ($457,000) and so on down to the poorest 10%, whose assets and debts were essentially the same, leaving them with only $400 in net worth per family.
“Basically, remember that 40 to 50% of Canadians do not have much in the way of accumulated wealth,” summarizes Gaëlle Simard-Duplain, professor of economics at Carleton University in Ottawa. Unlike the United States, income redistribution mechanisms in Canada have long managed to counterbalance the increase in market inequalities. “But in the case of heritage, it is much less true, because we do not really have an inheritance tax or such an organized wealth redistribution mechanism. »
“It is perhaps still a little too early to truly observe the great transmission of wealth announced. After all, the baby boomers have not all even reached retirement age yet, says economist at the University of Sherbrooke and researcher at the Laboratory on Global Inequalities, François Delorme. But it’s something we don’t hear enough about and it’s going to be very important. If only for the danger it represents in terms of reproduction and exacerbation of wealth inequalities. »
The promised great intergenerational wealth transfer may turn out to be less than advertised, our experts warn. “With life expectancy increasing and health costs increasing, it is possible that older people will be forced to significantly reduce their accumulated wealth,” notes Maude Pugliese.
Learning
But not everyone waits until they die to pass on at least part of their inheritance. Three-quarters of people aged 18 to 34 interviewed by Maude Pugliese, as part of recent research, said they could count on their parents in the event of financial difficulty.
A growing number of parents and grandparents are helping to pay for the post-secondary education of the youngest in the family, a Desjardins Movement study noted last summer. According to a recent survey by the Canada Mortgage and Housing Corporation, almost a third of first-time home buyers in Quebec receive a monetary gift from a loved one for their down payment.
The prospect of a large intergenerational transfer of wealth raises all kinds of questions, both from the point of view of individuals and that of society, observes Maude Pugliese.
As having assets to bequeath is something new for the majority of Quebecers and the law comes with relatively few constraints in this area, they often have to find for themselves the rules that will guide them. They will essentially leave it to their spouses, children and close relatives, if we rely on studies done in the United States.
“For many, it is important that everyone has the right to an equal share, because beyond its material aspects, an inheritance is seen as a gesture of affection. But others will seek to help those who need it most, or those who appear to them to be the most deserving,” says the sociologist.
This can lead to all kinds of sometimes surprising situations depending on the backgrounds and values of each person. More likely, for example, to be providers, 30% of Quebec fathers who have remarried end up leaving nothing for their children born from their first union, compared to only 12% of mothers who are more sensitive to the emotional impact of their decision.
An inheritance and a bill
Experts, such as the French economist Thomas Piketty, have also shown that gaps in accumulated wealth contribute much more to the perpetuation and widening of wealth inequalities than income gaps to which we have become accustomed to bearing a lot of weight. more attention. “This would normally call for greater taxation of inheritances,” says François Delorme. But judging by the strong pushback against the recent capital gains tax increase among doctors and other influential groups, I suspect it won’t be easy to pass. »
It’s not just the rich who don’t seem keen on the idea of taxing inheritances more. In a recent survey, the Association for Public Health of Quebec asked Quebecers what action they favored to reduce wealth inequalities. Improving pension plans (84%), more money in affordable housing (80%) and reducing wage gaps (74%) were among the favorites while increasing taxation on large inheritances came last (44%).
These issues are set to come to the forefront more and more often, observed the Desjardins Movement in its analysis. Not only because of the unprecedented importance of the intergenerational transfer of wealth that must occur. But also, because, at the same time, it is the youngest generations who will be “disproportionately” responsible for the sharp increase in health and social assistance costs linked to the aging of the population. baby boomersnot to mention the costs of the green transition.