Key Takeaways
- Baby boomers are set to pass on approximately $84 trillion in wealth to heirs by 2045, greatly impacting personal finances and the economy.
- Wills, trusts, and annual gift strategies can help families minimize taxes and preserve the most wealth.
- Understanding rules like the step-up in basis and having open family conversations will help the process run better and smarter.
The United States is on the precipice of the largest wealth transfer in history; approximately $84 trillion will pass from one generation to the next by 2045. It’s expected to have a massive impact on inheritors, older loved ones who need help managing their finances, and others who must adjust to a changed financial future. It will influence retirement, investments, and tax strategies for decades. Here’s how to prepare, whether you’re leaving an inheritance or receiving one.
Wealth Transfer Size and Timeline
Industry analysts predict that baby boomers—those born between 1946 and 1964—will pass on approximately $84 trillion in wealth to their heirs by 2045. That’s almost three times the current GDP of the U.S.
The timing, tax implications, and distribution methods relating to this wealth transfer will affect how much heirs, primarily Gen X, millennials, and Gen Z, receive, and in turn, how that will shape their financial decisions, the economy, investment markets, housing prices, and retirement planning. For this reason, all parties need to be ready.
“I do not see millennials or Gen Z as fully prepared for the wealth transfer we have on the horizon. Many in these generations have not begun meaningful financial planning, which may stem from limited financial education or simply not having discretionary income left after covering essentials,” said Kevin Kautzmann, CFP, and founder of EBNY Financial.
Kautzmann stresses that “a windfall inheritance should be viewed as a springboard to financial freedom, not just as a way to fund a summer vacation abroad. By creating a plan and allocating money wisely, heirs can set themselves, their children, and even future generations up for long-term success.”
“Millennials and Gen X will inherit the largest share of that, with Gen Z following after,” he said. “These generations think about money differently than baby boomers did; more emphasis on flexibility, experiences, and in some cases, sustainability, and that will shape how this wealth transfer plays out in the economy.”
Key Rules and Ideas
There are certain tax rules to keep in mind regarding transfers of wealth. They will impact how much beneficiaries receive and influence the inheritance strategies families implement.
Estate Tax Exemption
There is a limit to how much wealth individuals can pass to others without tax consequences. As of 2025, during their lifetime, an individual can transfer up to about $13.99 million tax-free to their heirs without paying federal taxes. For married couples filing jointly, the amount is $27.98 million. Any amount above those limits will be taxed.
Understanding this limit is important for people who intend to leave homes, investments, and other assets to their heirs. While for most families this level is not a concern, those with higher net worths will need to plan strategically to ensure that as much of their wealth as possible passes to their beneficiaries.
Annual Gift Exclusion
In addition to the lifetime estate tax exemption, the IRS also allows an annual gift exclusion. For 2025, individuals can give up to $19,000 per person, to any number of people, without reporting it to the IRS. Any more than that, and the IRS deducts it from your lifetime limit ($13.99 million for individuals, $27.98 million for married couples filing jointly.) The funds are taxed only once they exceed those multi-million-dollar limits.
Say Jan, a single mother, has two children, Tom and Timothy. Jan can give Tom up to $19,000 and Timothy up to $19,000 in 2025 without reporting it to the IRS. If Jan wanted to give more than that, they would need to report it to the IRS, and those funds would be deducted from their lifetime limit of $13.99 million.
Step-Up in Basis
The step-up in basis provision stipulates that when you inherit assets such as real estate or stocks, the cost basis resets to the current market value.
For example, if your parents bought stocks for $200,000 that are now valued at $500,000, they’d have to pay a capital gains tax on $300,000 if they sold them for $500,000. The step-up in basis rule states that if you inherit the stocks, the cost basis would be $500,000, not $200,000. If you then sold them at $500,000 after inheriting them, you wouldn’t owe any capital gains tax. This results in massive tax savings on years or even decades of capital appreciation, and smart preservation of wealth from one generation to the next.
Trusts
Trusts are extremely useful. They control how assets are distributed, allowing the benefactor to determine how and when their beneficiaries will inherit the estate. They help you avoid probate, which can be time-consuming and expensive, particularly for large estates, and they protect beneficiaries from financial mistakes. They can also reduce estate taxes.
Fast Fact
This great wealth transfer will primarily impact high-net-worth and ultra-high-net-worth households, as about 42% of the overall total volume of transfers will come from just 1.5% of households.
Actionable Steps for Families
For Aging Parents
For those who will be passing on their wealth, most likely parents or grandparents, it’s important to get organized early. You don’t want to scramble at the last minute or leave a mess of assets and paperwork for your heirs to sort out.
“Most people don’t even have the basics of a will, durable power of attorney, and advanced directives,” Kautzmann said. “Estate tax issues are also a major pitfall, particularly at the state level. For example, New York clients may find themselves leaving a large chunk of their estate to Albany if they don’t plan ahead. Families can avoid these problems by being proactive, engaging with financial planners, CPAs, and attorneys early, and ensuring the right structures are in place well before the wealth transfer occurs.”
The best way to preserve your wealth and ensure that your heirs get as much of it as possible without issue is by having a comprehensive estate plan that may include a will, a trust, and gifting strategies. Consider utilizing the annual gift exclusion to distribute assets gradually over time, and contemplate using a trust to avoid the probate process and safeguard beneficiaries.
In addition, it’s important to have conversations with your heirs about your plan and desires. This helps keep everyone on the same page and prevents disputes.
“Even with proper estate planning, families can still encounter unexpected challenges,” Kautzmann said. “That’s why it’s essential to create some framework, whether it’s trust, family documents, or simply open communication. A clear plan doesn’t just preserve wealth, it preserves family relationships during what is already a difficult time.”
For Potential Heirs
If you’re the child or grandchild of a baby boomer and are expecting an inheritance, have a conversation with your parents or grandparents, if you haven’t done so already. You may be the one managing the estate at the time of their passing, so having everything in order beforehand will help the inheritance process run smoothly.
Furthermore, think about what you will inherit and how that will impact your finances. Receiving stocks or property with a step-up in basis will help you sell (if you choose to do so) without a large capital gains tax. For retirement planning, an inheritance may shift your retirement date, your savings goal, your retirement plans, and more.
“One likely outcome is an increase in housing inventory. Many boomers have not downsized as quickly as prior generations, meaning larger family homes remain occupied by empty nesters,” Kautzmann said. “As those homes are transferred, whether kept in families or sold, we could see more opportunities for younger families in the housing market.”
The Bottom Line
The large transfer of baby boomer wealth will have a profound impact on the personal finances of many individuals, as well as the economy.
Families can prepare for this shift now by employing estate planning strategies, which include trusts, wills, and strategic gifting. Heirs can benefit by understanding applicable tax rules, such as the step-up in basis.
Frank conversations and smart preparation can help ensure a smooth inheritance process, reduce possibilities for disputes, and preserve wealth.
