How to prepare for the great wealth transfer: A $124 trillion shift

Inheritance has long been a factor in many individuals’ financial plans, but it may look a little different for the next decade or so. It’s all because of "the great wealth transfer."

What is the great wealth transfer?

The wealth that the silent generation (born 1928 to 1945) and baby boomers (born 1946 to 1964) accumulated during their lifetimes is starting to make its way to the next generations. It’s estimated that roughly $124 trillion will change hands in the U.S. by 2048,¹ referred to as the great wealth transfer.

Much of the wealth will be transferred to younger Gen Xers, millennials and even some older Gen Zers. While inheritance and wealth transfer may be triggered by death, some people may start transferring their wealth to beneficiaries during their lifetimes for tax reasons.

If you’re expecting a large inheritance, especially if you currently have modest means, it’s important to prepare now so you can make the best decisions about how to manage your wealth later. And if you’re the one with assets to hand down, you should start planning now to ensure the process is as seamless and tax efficient as possible.

Preparing for the great wealth transfer

Inheriting money, property or other assets won’t just increase the size of your estate. It can change your life in several ways, from financial to emotional.

Using financial education to manage inherited wealth.

If you’re expecting to inherit as part of the great wealth transfer, it’s critical to understand money management, financial planning, investing, taxes and other financial concepts. If you feel like you need more financial education than you currently have, consider reading personal finance content from reputable companies, listening to financial podcasts or consulting a financial professional.

You may be going from a moderate salary, a car loan and perhaps a mortgage to a significantly more complicated financial picture, so start by ensuring your current finances are optimized. Make a financial plan that maps out your short- and long-term goals and includes a budget if you don’t already have one.

Understanding tax implications for inherited wealth.

Taxes can significantly reduce the value of inherited wealth both before and after you receive it, so you should understand the different types and how they might affect you. They include:

• Income tax: Assets you inherit aren’t generally considered taxable at the federal level, but any income you receive from them (such as dividends from inherited stock, the interest on a bank account, royalties, or rental income from inherited property) will be subject to income tax.
• Capital gains tax: This tax can apply to capital gains you receive from the sale of inherited assets. For example, if you inherit a house that’s valued at $400,000 and you sell it for $800,000, you may need to pay capital gains tax. How much you’ll pay depends on whether you lived in the home; if you did, you may be able to take advantage of the “sale of home exclusion” – currently, the first $250,000 of capital gains. So, in the example above, you may need to pay capital gains tax on $150,000 ($400,000 minus $250,000) if you lived in the house, or on the full $400,000 gain if you didn’t.
• Estate tax: Estate taxes are levied on the estate of the person who died, rather than the inheritor, but it could reduce the amount of wealth you inherit. The federal estate tax rate ranges from 18% to 40%, increasing as the fair market value of the assets exceeds the exemption amount. Starting in 2026, the federal estate tax exemption is $15 million for individuals and $30 million for married couples, indexed for inflation. Twelve states and the District of Columbia also levy state-level estate taxes, which apply if the decedent was a resident in one of those states when they died.
• Inheritance tax: Inheritance tax is levied on the inheritor, who usually has to pay the taxes within a few months of receiving the inheritance. There is no federal inheritance tax, and only five states (Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania) currently levy a state-level inheritance tax, with the highest taxation level topping out at 16%. Spouses and some close family members are often exempt. 

Emotional and lifestyle adjustments after inheriting wealth.

Inheriting wealth can lead to significant life changes. A large inheritance may change your career goals or your plans for retirement. For example, you might be able to trade in your high-stress corporate job for one that pays less but is more fulfilling. You could decide to use your windfall to finally start the business or nonprofit you’ve been dreaming of. You might be able to retire early. Or you might want to put your inherited wealth toward philanthropic activities.

With many possible paths available to you, it’s important to have a solid financial plan that allows you to not only achieve your dreams but also maintain them for your lifetime and beyond.

What if you're the one transferring wealth?

If you’re the one leaving wealth behind, a key piece of your wealth transfer plan will be putting legal documents in place that direct the transfer of your assets.

If you’ve named beneficiaries on any of your retirement accounts, you’ve already started the intergenerational wealth transfer process. If you have tangible assets that are solely in your name, such as real estate, you should have a will or living trust in place that titles the assets in the name of the trust.

Creating a wealth transfer plan can feel like a difficult task, because it means you have to face your own mortality. But the lack of a plan is a plan, too – it’s just one that’s going to be defined by the government. Creating a formal plan gives you control and ensures that your assets go where you want them to go.

A financial professional can help make the great wealth transfer process easier. They can facilitate multigenerational conversations about wealth, so the family legacy continues in a way that meets both the individuals’ and family’s goals and objectives.  

Creating a well-thought-out intergenerational wealth transfer plan becomes a gift to both the giver and the receiver by avoiding the need to make decisions during times of grief or stress

Prepare now for the great wealth transfer

Whether you’ll be transferring your wealth or will inherit wealth, some preparation now can help ease the transition and maintain and grow wealth for future generations. A financial professional can be invaluable in navigating what can be a complex time emotionally and financially.

Learn how our approach to wealth planning can help you see a full view of your financial picture.