'A trillion-dollar tsunami': Canadians grapple with unprecedented wealth transfer

Canada is in the midst of an unprecedented transfer of wealth that experts say could have significant social and economic implications for the country.

The Chartered Professional Accountants of Canada said in 2023 that $1 trillion of wealth was expected to move between Canadian baby boomers and their millennial and Generation X children from 2023 to 2026.

Much of that money is the result of real estate wealth, as many baby boomers have benefited from sharply rising home prices and other investments.

Keith Willoughby, who runs the Edwards School of Business at the University of Saskatchewan, said this wealth transfer could have a widespread impact on the broader economy and society.

"We're talking about a trillion-dollar tsunami that is about to hit this nation, which is unparalleled in our history," he said.

The situation is especially visible in cities like Toronto and Vancouver, where home values have risen the most, but Willoughby said Saskatchewan is also experiencing this phenomenon.

Willoughby said that money will pile back into the housing market as those children buy houses with those gifted funds, or have their parents directly contribute to down payments.

In light of Canada's housing shortage, that influx of money is likely putting upward demand pressure on the housing market.

"Assuming there's no increase in the supply of homes, the supply of cottages, the supply of vehicles and the like, you're actually going to increase the equilibrium price," Willoughby said.

According to CIBC, 31 per cent of first-time homebuyers in Canada in 2024 received financial help from family members to buy a home. That was up from 20 per cent in 2015.

CIBC also reports that the average value of monetary gifts has risen dramatically, to $115,000 in 2024 from $66,000 in 2019.

These transfers are expanding wealth divides that go back decades. A 2023 study by Statistics Canada found that among people born in the 1990s, those whose parents were homeowners were twice as likely to be homeowners themselves compared to those whose parents did not own homes.

"I think it creates a disturbance within society, because I think we're almost hardwired in our DNA to link cause and effect. That 'If I do X, I should get Y,'" Willoughby said. "You could be wealthy or wealthier by working in a productive profession, or you could be wealthy or wealthier by simply being the luck of the draw."

Macleans writer Katrina Onstad describes our growing sense of mismatch between someone's lifestyle and their perceived income as "status fog," where invisible wealth alters a person's place in society relative to their perceived income, and distorts our perception of a middle-class lifestyle.

Ballooning farm values

In Saskatchewan, the steady increase in land values has placed family farms at the centre of this phenomenon.

According to Statistics Canada, the average value per acre of farmland and buildings in Saskatchewan has nearly doubled since 2016.

Donovan Tofin, a wealth management advisor for farmers based in Saskatoon, said the average value of a farm in the province is now likely more than $3 million.

Tofin said that's creating tension in some farm families, as owners debate whether to sell the farm or pass it on to their children.

"Looking back at my career in the '80s and '90s, sitting around the table with the family it was basically, well, which one of you poor souls got to stay in farming?" he said. "Today it's the opposite, where the kids know there's a lot of wealth. They're not sure what the number is, but they know there's significant wealth there."

An unequal distribution

Not all young Canadians will be a part of this wealth transfer. Newcomers who didn't participate in the Canadian housing market decades ago, and Indigenous people, who were largely prohibited from doing so due to colonial laws, have less to pass down.

Home ownership was not permitted on reserves, and Indigenous people were barred from owning and running their own businesses.  

"We don't even have really a boomer generation to pass stuff down," said Jason Bird, who teaches business at First Nations University of Canada. "Most of the people from that generation, numerous of them have passed on already. They're already gone, but there was never a real inclusion in the wider economy so there wasn't much to leave.

"Wealth is kind of judged differently in Indigenous communities. Really, the ability to share more is actually considered wealth. The more you have, the more you can give, and the more you can give, the more it helps numerous people."

Converting gifts to donations

Donating inherited money has become more popular as inheritances have grown.

Donna Ziegler is the executive director of the South Saskatchewan Community Foundation, which helps individuals and businesses set up funds that benefit charities in perpetuity. She leveraged Saskatchewan's agricultural wealth to build a property holding company that donates the proceeds of land rental income to local communities.

"When we're talking about intergenerational transfer of wealth, it's keeping that wealth alive onto the next generation," she said.

Other people are taking individual steps to donate their newfound wealth. Jess Klaassen-Wright, a U of S medical student who received a $300,000 inheritance, is part of a group called Resource Movement. It educates people on how to redistribute their wealth effectively.

"Getting that money really made me think more that I wanted to actually take steps to connect to an organization and make some goals," they said.

"How much money do I actually need to live my life in a way that I feel safe living?"

Klaassen-Wright hasn't decided yet on what their strategy will be, but said it will likely involve redistributing a portion of their income and total net worth.

Canada has not had an inheritance tax since 1972, so these redistribution efforts remain optional. But Willoughby believes that Canada, which is the only country in the G7 without one, could benefit from studying it.

"For generations we have hung our hat on this notion that the CRA is going to tax income, not wealth, and until the CRA changes that tune or the government changes that perspective, I think we are a long way away from an inheritance tax," he said.

"I think it would help Canada though to maybe take a look at those jurisdictions that have incorporated this just to see, are there ways of maybe teasing out some of the benefits."

This story is from the This is Saskatchewan podcast — your connection to the stories Saskatchewan is talking about. Every week, Leisha Grebinski and Nichole Huck will cover local issues that matter. Hear the voices that are creating change, shaping policy and fuelling creativity in Saskatchewan.

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