Summary
- A $90 trillion wealth transfer to the next generation is expected in the next ten years.
- Start planning early to transfer wealth and communicate those plans with your family.
- Important considerations include tax planning, insurance, business succession, and philanthropic desires.
- Unbiased can connect you to an expert financial advisor for wealth transfer and financial planning needs.
What is the great wealth transfer?
Estate planning is one of the most important considerations you’ll have for your money.
The great wealth transfer refers to the inheritance children expect to receive from parents and grandparents in the next ten years. According to Northwestern Mutual’s 2025 Planning & Progress Study, 31% of U.S. adults plan to leave an inheritance. Over half of this amount is expected to occur in the next ten years.
Collectively, this amounts to more than $90 trillion in wealth expected to pass to the next generation in subsequent years.
Estate planning becomes critical for keeping more of your wealth in the hands of your loved ones. Without proper planning, you could owe a significant amount in taxes and attorney’s fees, and that’s before family conflicts arise.
How can you prepare for a family wealth transfer?
As you start to think about how you can prepare for a family wealth transfer, there are a few items that should be top of mind. These may include:
- What conversations has the family had about wealth?
- What roles do family members want to take on?
- What assets do you want to pass on?
- How are family members being prepared to receive wealth?
- What advisors do I need concerning taxes, financial planning, philanthropy, etc.?
- When should I start the process?
The transfer of family wealth can also come with a lot of emotions. Start conversations with your family early and find advisors you can trust. With a family wealth transfer, explain your intention and help beneficiaries learn their roles and responsibilities.
What are the best strategies for family wealth transfer?
When you get into the details of transferring wealth, you may want to look closely at some of the following strategies.
Tax planning strategies
Tax-efficient strategies for transferring wealth may be top of mind due to the amount of money you could owe the government upon your passing. Understand what taxes may apply to you, and enlist the help of a tax planning expert for advanced strategies.
Some that you may want to consider include:
- Use tax-advantaged accounts strategically: Retirement accounts, HSAs, and other tax-advantaged accounts can increase tax efficiency and preserve more wealth for future generations.
- Strategize with tax-loss harvesting: You may be able to reduce capital gains with tax-loss harvesting.
- Take advantage of deductions and gifting: Strategic gifting can reduce the size of your estate. Gifts under the annual federal gift exclusion amount aren’t subject to taxes and don’t count toward the lifetime exemption.
- Manage capital gains: Where possible, plan for gifting assets where a step-up basis can reduce or eliminate capital gains.
- Plan around income thresholds: Strategic withdrawals, Roth conversions, and asset transfers can help you stay within more favorable tax brackets.
- Asset location: The account where you put certain assets matters. Tax-inefficient assets may work better in a tax-efficient account, while tax-efficient assets may be placed in taxable brokerage accounts.
- Retirement contributions: Maximizing retirement savings can lower taxable income today while supporting long-term financial goals for the family.
Annual gifting
You may give up to $19,000 per person each year without paying taxes on it or using up your lifetime gift and estate exclusion. The amount is multiplied when both you and your spouse give this amount to a child, doubling the amount you can give to a single person.
Direct payments for education or medical gifts are not subject to the IRS’s annual gift tax limit.
You might consider upstream gifting to an elderly parent to reduce taxes. With this strategy, it’s important to be aware of the rules and consequences so it doesn’t backfire on you or your parents.
Transferring wealth early can help you reduce the taxes you’ll pay now, while also reducing the size of your estate to minimize estate taxes later.
Set up family governance and estate planning
A big part of efficiently transferring wealth is setting up systems to help the family make decisions. Enter family governance, the set of principles, practices, and systems that help guide a family’s decision-making regarding its wealth. It brings clarity and purpose while reducing conflict (ideally).
For example, a family can set up governance for how family members can gain access to wealth to support education, entrepreneurship, homeownership, and more.
Estate planning is also a critical component of transferring wealth efficiently. Tools such as trusts, wills, power of attorney, health care and medical directives, end-of-life plans, and plans for estate and inheritance taxes can be utilized to help preserve wealth.
Charitable planning
The value of donations to charities is deductible from the value of your estate and doesn’t count towards your lifetime gifting and estate exemption amount. As a family, you can discuss which causes you want to support, set up trusts to fund them, and plan other charitable gifts as a family.
Business succession planning
Many families with wealth have businesses that need succession plans. A succession plan is where a company identifies critical leadership roles and identifies possible replacements to ensure business continuity. Whether that’s identifying family members that can serve in leadership positions or an exit strategy, having a plan in place helps ensure the business provides the expected wealth to the family.
How to start your family wealth transfer?
Step 1: Define goals
Start with clarity. Transferring wealth begins with your goals. How do you want your wealth to benefit your family, heirs, and philanthropic causes? Have a family meeting and involve everyone. Discuss financial literacy and core values. Create a shared vision for the future, with aligned values and goals.
Step 2: Take an accounting of your assets
Make a comprehensive list of your assets and name a beneficiary for each. Key assets to inventory may include:
- Real estate, such as your primary residence, vacation homes, rental properties, and land.
- Bank accounts, brokerage accounts,
- Investments, retirement accounts, bank accounts,
- Business interests, such as partnerships, LLCs, and intellectual property.
- Personal property, such as vehicles, art, antiques, collectibles, or other valuables.
- Life insurance annuities.
- Digital assets, such as cryptocurrency, monetized websites, and social media accounts.
Step 3: Build your advisory team
For significant family wealth, you’ll want experts to help advise your decision-making. Each has a role in creating an integrated plan to transfer wealth. Consider the following team members:
- Estate planning attorney: An attorney drafts wills, sets up trusts and other legal structures to minimize taxes and transfer wealth as efficiently as possible.
- Tax advisor/CPA: A tax advisor guides tax planning strategies and ensures compliance with tax laws.
- Trust officer or trustee: You’ll need someone to administer the trusts and ensure instructions are followed as per the trust documents.
- Financial advisor: Financial advisors set up and manage investments, create and maintain a financial plan, plan for retirement, and do many other things.
- Insurance advisor: You may need an expert to steer you in the right direction of insurance, risk management, and protecting family wealth.
- Philanthropic advisor: Tapping someone with the expertise to set up and manage charitable causes may be on your list.
Step 4: Implement strategies
Follow through with recommendations made by your advisory team. Some of these may include:
- Setting up and funding trusts
- Formalizing business succession plans
- Planning annual gifting
- Setting up charitable giving
- Setting up family governance and estate plans
- Designating beneficiaries
- Putting in place tax-efficient strategies
Step 5: Communicate the plan and review often
Keep heirs informed of your plans and prepare them for the financial responsibility that comes with wealth.
Review your wealth transfer plan regularly. Laws change, priorities shift, financial situations alter, and it’s worthwhile to evaluate and adjust your plan as needed.
Bottom line
Transferring wealth can be an emotional and complex process. There’s much to be said for seeking professional advice.
Unbiased can match you with a financial advisor to answer your questions about tax and estate planning, investing, retirement, and more.