What is considered a large inheritance?

Whether an inheritance is considered large depends on who you ask. The average inheritance amount is $46,200. That's almost five times the amount received by the bottom 50% of Americans in terms of wealth. Meanwhile, the wealthiest 1% of Americans receive $719,000 on average. If an inheritance exceeds $11.7 million, it's subject to a higher level of taxes.

How much is the average American inheritance?

The average inheritance for Americans in $46,200. That includes individuals of all wealth levels who receive an inheritance. However, the bottom 50% of that group receive inheritances on average of $9,700, while the top 1% of Americans in terms of wealth receive $719,000 on average.

Kevin O'Leary Is Concerned About Leaving Too Large an Inheritance -- So Are Two-Thirds of High-Net-Worth Individuals

Not all high-net-worth individuals plan on leaving money to their children.

By Jack Caporal – Updated Oct 12, 2021 at 12:35 PM EST | Fact-checked by Margo Winton Parodi

Key Points

67% of high-net-worth individuals set conditions on inheritances to prevent misuse.
85% consider taxes crucial in planning inheritances, with potential changes impacting strategies.
64% of these individuals consider skipping generations with trusts to distribute wealth.

Shark Tank star and multi-millionaire Kevin O'Leary won't leave an inheritance for his kids and will limit what's available to his grandchildren. Why?

Because he's concerned that a large inheritance will "curse" them -- a concern shared by two-thirds of high-net-worth (HNW) individuals surveyed by The Motley Fool.

Instead, O'Leary has designed a trust that skips his adult children and will support his grandchildren until they graduate from college, a design that over 60% of high-net-worth individuals surveyed by The Motley Fool have considered.

Because of their wealth, HNW individuals have unique considerations when it comes to inheritances -- after all, only 2% of inheritances are over $1 million, but those are responsible for 40% of all dollars distributed via inheritances.

With baby boomers aging and holding $30 trillion to $40 trillion worth of assets, it's hard to overstate the importance of how high-net-worth individuals are approaching inheritances.

To better understand how high-net-worth individuals approach inheritances, The Motley Fool surveyed them.

Key findings

Two-thirds of high-net-worth (HNW) individuals are concerned about leaving too large an inheritance to their heirs.
The most common concern with leaving too much money to an heir was that the money would be used irresponsibly.
68% of HNW individuals plan on making access to the inheritance they leave contingent on meeting specific conditions.
HNW individuals who received an inheritance of $500,000 or more were more likely to be concerned about leaving too large an inheritance. Receiving an inheritance with conditions for access was also correlated with this concern.
Taxes are important to high-net-worth individuals when it comes to inheritance.
One-third of HNW individuals plan on leaving at least half of their assets to an heir as an inheritance.
Two-thirds of high-net-worth individuals plan on leaving part of their estate to charitable causes.
The wealthiest 1% of Americans receive an average inheritance of $719,000, while the bottom 50% averages $9,700.

76% of high-net-worth individuals plan to leave an inheritance, but 67% have concerns about leaving too much

High-net-worth individuals assign importance to leaving an inheritance, yet two-thirds of those surveyed by The Motley Fool said they have concerns about leaving too large of an inheritance to their family.

We asked those respondents about their concerns, and found that most feared that the assets they leave would be used irresponsibly and that their heirs are not prepared to manage a large inheritance. And 56% of HNW individuals surveyed by The Motley Fool shared Kevin O'Leary's concern that a large inheritance would result in lazy heirs.

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Survey conducted by The Motley Fool via Pollfish on September 2, 2021. Respondents were allowed to choose more than one option.
What are your concerns with leaving too large of an inheritance?	Percentage of respondents
Money/assets would be used irresponsibly.	58.74%
Beneficiaries are not prepared to manage a large inheritance.	56.54%
Believe assets would have better use elsewhere (e.g., charity).	56.03%
Doing so would cause beneficiaries to be lazy.	55.77%
Concerned about the attention it would attract.	54.84%
Other	8.40%

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Over two-thirds of high-net-worth individuals plan to require their heirs to meet conditions to access their inheritance

About 68% of HNW individuals plan to leave an inheritance that requires heirs to meet conditions to access it, a method to mitigate concerns about leaving too large an inheritance.

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Survey conducted by The Motley Fool via Pollfish on September 2, 2021.
Will that inheritance come with conditions to access it? For example, in the form of an incentive trust.	Percentage of respondents
Yes	67.74%
No	32.26%

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Assets that require certain conditions to be met for an heir to access them usually come in the form of trusts, which allow a trustee to manage those assets.

For example, an incentive trust could provide funds to a beneficiary if they meet certain academic criteria, like earning a bachelor's degree. Other incentive trusts match the beneficiary's income. In these cases, the more the beneficiary earns, the more they receive.

Some incentive trusts have been criticized for containing conditions that are too strict or unobtainable or as not necessarily rewarding good behavior. A trust that is released upon earning a bachelor's degree could discourage an heir from dropping out of school to pursue what could be a million-dollar idea. And a trust that matches income could disincentivize an heir from pursuing their passion in a relatively low-paying field that has significant public upside, like social work, journalism, or teaching.

64% of high-net-worth individuals have considered a generation-skipping inheritance

Sixty-four percent of HNW individuals surveyed by The Motley Fool have considered a generation-skipping trust or an incentive trust, the latter of which passes assets to the grantor's grandchildren or anyone at least 37.5 years younger than the grantor who is not a spouse or ex-spouse.

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Survey conducted by The Motley Fool via Pollfish on September 2, 2021.
Have you considered establishing a generation-skipping inheritance or an incentive trust?	Percentage of respondents
Yes	63.94%
No	36.06%

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Generation-skipping trusts carry a couple of benefits. They dodge estate taxes that would otherwise be applied if assets were passed to the grantor's children (although they are subject to taxation if the assets exceed $11.7 million). They can also mitigate concerns about leaving too large an inheritance by specifying that assets be spread over multiple generations.

High-net-worth individuals who received larger inheritances and inheritances with conditions are more likely to have concerns about the size of the inheritance they'll leave

Of our respondents, 67% said it's possible to leave too large an inheritance. But certain factors made people more likely to agree with that statement.

Eighty-five percent of high-net-worth individuals who had to meet conditions to access their own inheritance, for example, believe it's possible to leave behind too large of an inheritance.

And 84% of those who received an inheritance worth between $500,000 and $1 million shared that belief, a higher percentage than those who received smaller inheritances, and only slightly higher than those who received over $1 million.

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Survey conducted by The Motley Fool via Pollfish on September 2, 2021.
Respondents by inheritance amount or conditions	Believe it's possible to leave too much of an inheritance behind
Received less than $100,000 in inheritance	69.16%
Received between $100,000 and $500,000 in inheritance	78.54%
Received between $500,000 and $1 million in inheritnace	84.47%
Received over $1 million in inheritance	77.63%
Received inheritance, but unsure of value	49.06%
Received inheritance and had to meet certain conditions to access it	85.01%
Received inheritance and didn't have to meet any conditions	50.73%

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Sixty-eight percent of HNW individuals surveyed by The Motley Fool plan to require their inheritors to meet certain conditions to access their inheritance, but having experience with this type of inheritance increased that number.

Eighty-eight percent of high-net-worth individuals who had to meet conditions to access their inheritance said the inheritance they leave behind will come with conditions to access it. Of those who received an inheritance without conditions, just 55% said they would leave an inheritance with conditions.

Again, those who received a large inheritance were more likely to leave an inheritance with conditions that must be met to access it.

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Survey conducted by The Motley Fool via Pollfish on September 2, 2021.
Respondents by inheritance amount or conditions	Will leave an inheritance with conditions to access it
Received less than $100,000 in inheritance	75.51%
Received between $100,000 and $500,000 in inheritance	77.25%
Received between $500,000 and $1 million in inheritance	86.00%
Received over $1 million in inheritance	85.38%
Received inheritance, but unsure of value	51.35%
Received inheritance and had to meet certain conditions to access it	87.58%
Received inheritance and didn't have to meet any conditions	55.06%

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85% of high-net-worth individuals say taxes play an important role in how they will structure their inheritance

When transferring assets of significant value through an inheritance, taxes have the potential to be costly -- so costly that taxes are an important factor for how 85% of HNW individuals plan to structure their inheritance.

The federal estate tax is the most relevant tax in this area. It is applied to a deceased person's assets if they are worth $11.7 million or more -- a threshold that makes the tax of particular concern to HNW individuals. The value of an estate that exceeds $11.7 million is subject to a 40% tax -- a steep rate that high-net-worth individuals are keen to avoid.

Twelve states and the District of Columbia maintain their own estate taxes with lower thresholds than the federal estate tax, but lower rates. And six states have implemented inheritance taxes that are levied on heirs when they receive bequeathed assets.

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Survey conducted by The Motley Fool via Pollfish on September 2, 2021.
How important are tax considerations when structuring your inheritance?	Percentage of respondents
Very important	58.86%
Somewhat important	26.40%
Not important	14.74%

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A third of high-net-worth individuals plan to leave over 50% of their assets in an inheritance

A third of the HNW individuals surveyed by The Motley Fool said they intend to leave over 50% of their assets in an inheritance.

Another 31% reported that they intend to bequeath 26–50% of their assets. Only 8.4% were unsure about what percentage of their assets would be included in the inheritance they leave.

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Survey conducted by The Motley Fool via Pollfish on September 2, 2021.
What percentage of your assets do you intend to leave in an inheritance?	Percentage of respondents
1–10%	9.72%
11–25%	16.93%
26–50%	31.10%
Over 50%	33.81%
I'm not sure	8.44%

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Over 60% of HNW individuals find it important to leave an inheritance

Leaving an inheritance is very important to 59% of high-net-worth individuals and somewhat important to 26% of those surveyed by The Motley Fool.

Survey conducted by The Motley Fool via Pollfish on September 2, 2021.
How important is it to you that you leave an inheritance?	Percentage of respondents
Very important	59.03%
Somewhat important	26.17%
Not important	14.80%

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This tracks with data gathered by U.S. Trust, which found that 64% of HNW individuals believed that passing on an inheritance is an important financial goal.

Millennials were most likely to view passing on an inheritance as an important financial goal, per that survey, while baby boomers were least likely to.

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Data source: U.S. Trust (2017).
Generation	Passing on a financial inheritance is an important financial goal	Passing on a financial inheritance is not an important financial goal	Don't know
Millennials	82%	14%	4%
Gen X	63%	28%	9%
Baby boomers	57%	36%	7%
Silent	76%	21%	3%

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66% of high-net-worth individuals plan to bequeath part of their estate to charitable causes

HNW individuals are also passionate about philanthropy, and 66% of those surveyed by The Motley Fool planned to leave part of their estate to charitable causes.

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Survey conducted by The Motley Fool via Pollfish on September 2, 2021.
Do you intend to bequeath part of your estate to a charitable cause?	Percentage of respondents
Yes	66.40%
No	33.60%

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Assets left to charitable organizations aren't subject to estate taxes, which is an added bonus to supporting an important cause.

The top 1% receive over $700,000 more in inheritance than the bottom 50%

It's no surprise that wealthier families receive and expect to receive larger inheritances -- the wealthiest 1% of Americans receive inheritances worth an average of $719,000, while the bottom 50% receive inheritances worth $9,700.

The average inheritance overall is $46,200 dollars.

The gap in inheritance received between the top 1% and the 9% below them is also striking -- roughly $545,000 dollars.

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Data source: Federal Reserve (2019).
Wealth percentile	Amount received	Amount expected	Parent with college degree
Top 1%	$719,000	$941,100	58%
2–10%	$174,200	$266,600	47%
11–49%	$45,900	$60,100	33%
Bottom 50%	$9,700	$29,400	28%
All	$46,200	$72,200	32%

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Only 2% of inheritances are valued over $1 million, but they are responsible for 40% of all dollars distributed via inheritances

The fact that only 2% of inheritances in 2018 were valued over $1 million but those inheritances accounted for 40% of all dollars distributed via inheritances is additional evidence that high-net-worth individuals likely think about inheritances differently than the average American.

Meanwhile, 55% of inheritances were valued at under $50,000 but accounted for just 5% of dollars distributed through inheritances.

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Data source: Federal Reserve (2019).
Size of inheritance	Percent of all inheritances distributed	Percent of dollars of all inheritances distributed
<$50,000	55.46%	5.10%
$50,000–$249,000	30.33%	21.17%
$250,000–$499,000	8.24%	16.81%
$500,000–$1M	3.86%	15.96%
>$1M	2.12%	40.26%

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Data on gifts given while alive is similar -- 2% were valued at over $1 million but accounted for 49% of dollars distributed via gifts. And 73% of gifts were worth less than $50,000 but were responsible for just 10% of all dollars distributed via all gifts.

Data source: Federal Reserve (2019).
Size of gift given while alive	Percent of gifts	Percent of dollars of all gifts distributed
<$50,000	73%	10%
$50,000–$249,000	20%	21%
$250,000–$499,000	4%	13%
$500,000–$1M	1%	8%
>$1M	2%	49%

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The inheritance puzzle

For high-net-worth individuals, structuring an inheritance can be a complex puzzle with moving parts and weighty considerations.

Two issues are top of mind for HNW individuals when it comes to inheritances: concerns about leaving too large an inheritance to their children and taxes. There aren't easy answers to either of those concerns.

High-net-worth individuals can structure their inheritances to mitigate concerns about a large inheritance being mismanaged or leading their children to become lazy. Popular approaches include incentive trusts that set conditions to access bequeathed assets, like maintaining good grades or volunteering at a charity.

Navigating taxes is trickier. The federal estate tax and state estate taxes can bite, and there are some state inheritance taxes to consider as well.

And politicians have had their eyes on applying the capital gains tax on inherited assets, a potentially seismic shift in how inheritances are taxed. It's not clear whether policymakers in Washington will push that change through, but it is clear that the issue has their attention.

Sources

CNBC (2021). "'You curse a child when you de-risk their lives': Kevin O'Leary explains why he isn't leaving all his money to his kids."
Federal Reserve (2020). "Disparities in Wealth by Race and Ethnicity in the 2019 Survey of Consumer Finances."
Federal Reserve (2018). "How Does Intergenerational Wealth Transmission Affect Wealth Concentration? Accessible Data."
Federal Reserve (2020). "Wealth and Income Concentration in the SCF: 1989-2019."
Lily Batchelder and David Kamin (2019). "Taxing the Rich: Issues and Options."
U.S. Trust (2017). "U.S. Trust Insights on Wealth and Worth."

Methodology

The Motley Fool distributed this survey via Pollfish to 2,000 American adults ages 18 and over with a net worth of at least $1 million on September 2, 2021.

Respondents were 59% male and 41% female. Age breakdown was approximately 4% 18–24, 24% 25–34, 45% 35–44, 14% 45–54, and 13% over 54. Some percentages may not total to 100% due to rounding.

Pollfish employs organic random device engagement sampling, a method that recruits respondents through a randomized invitation process across various digital platforms. This technique helps to minimize selection bias and ensure a diverse participant pool.

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FAQs

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About the Author

Jack Caporal is the Research Director for The Motley Fool and Motley Fool Money. Jack leads efforts to identify and analyze trends shaping investing and personal financial decisions across the United States. His research has appeared in thousands of media outlets including Harvard Business Review, The New York Times, Bloomberg, and CNBC, and has been cited in congressional testimony. He previously covered business and economic trends as a reporter and policy analyst in Washington, D.C. He serves as Chair of the Trade Policy Committee at the World Trade Center in Denver, Colorado. He holds a B.A. degree in International Relations with a concentration in International Economics from Michigan State University.

TMFJackCap

The Motley Fool has a disclosure policy.

Kevin O'Leary Is Concerned About Leaving Too Large an Inheritance -- So Are Two-Thirds of High-Net-Worth Individuals

Not all high-net-worth individuals plan on leaving money to their children.

Key Points

Key findings

76% of high-net-worth individuals plan to leave an inheritance, but 67% have concerns about leaving too much

Over two-thirds of high-net-worth individuals plan to require their heirs to meet conditions to access their inheritance

64% of high-net-worth individuals have considered a generation-skipping inheritance

High-net-worth individuals who received larger inheritances and inheritances with conditions are more likely to have concerns about the size of the inheritance they'll leave

85% of high-net-worth individuals say taxes play an important role in how they will structure their inheritance

A third of high-net-worth individuals plan to leave over 50% of their assets in an inheritance

Over 60% of HNW individuals find it important to leave an inheritance

66% of high-net-worth individuals plan to bequeath part of their estate to charitable causes

The top 1% receive over $700,000 more in inheritance than the bottom 50%

Only 2% of inheritances are valued over $1 million, but they are responsible for 40% of all dollars distributed via inheritances

The inheritance puzzle

Sources

Methodology

FAQs

About the Author

Read Next

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Key findings

76% of high-net-worth individuals plan to leave an inheritance, but 67% have concerns about leaving too much

Over two-thirds of high-net-worth individuals plan to require their heirs to meet conditions to access their inheritance

64% of high-net-worth individuals have considered a generation-skipping inheritance

High-net-worth individuals who received larger inheritances and inheritances with conditions are more likely to have concerns about the size of the inheritance they'll leave

85% of high-net-worth individuals say taxes play an important role in how they will structure their inheritance

A third of high-net-worth individuals plan to leave over 50% of their assets in an inheritance

66% of high-net-worth individuals plan to bequeath part of their estate to charitable causes

The top 1% receive over $700,000 more in inheritance than the bottom 50%

Only 2% of inheritances are valued over $1 million, but they are responsible for 40% of all dollars distributed via inheritances

The inheritance puzzle

Sources

Methodology

FAQs