It is estimated by Cerulli Associates that more than $124 trillion of wealth will be transferred to younger generations over the next 20 years. Those recipients, as seen below, will primarily be from Generation X and the Millennial generation. 

Source: Cerulli Associates, “The Cerulli Report: U.S. High-Net-Worth and Ultra-High-Net-Worth Markets 2024” 

With this massive shift in wealth on the horizon, the key question becomes: How are families preparing themselves and the next generation for this eventual inheritance? While the timing of this transfer may be uncertain, we must consider how families can prepare themselves for that inevitability. 

The Older Generation 

Much of the wealth accumulated over the last 75 years has been achieved through hard work coupled with solid economic growth. This has placed much of today’s wealth in the older generation’s hands. Naturally, those who earned it tend to place high value on the effort it took to accumulate it and may worry that passing down assets could dampen the next generation’s desire for achievement of their own. The older, wealthier generations may be hesitant to give large gifts during their lifetime out of concern for “spoiling” their children or being perceived as offering handouts. 

However, rather than wait until they pass, there are many reasons to consider gifting some of those funds to their children/grandchildren today. 

Benefits of Gifting During Your Lifetime 

Witness the impact: You can see firsthand how your support enhances their quality of life or if they spend it on something questionable. You can experience pride in what they did with the funds or help them make better choices in the future. 

Support higher cost of living: This generation’s cost of living far exceeds prior generations, and offering some help allows for better outcomes, tax planning, and employment scenarios. 

Reduce future estate taxes: Who knows what future tax rates will be?  While it now takes assets exceeding $30 million per couple to trigger estate tax, it was only about 20 years ago that the amount was just $1 million. It could always revert back or be lowered by legislative action. 

Offer guidance: Gifts can be tied to specific goals, like paying off debt, funding education, or contributing to retirement savings, helping to reinforce financial responsibility. 

Reduce stress:  The American Psychological Association reports that 66% of adults stress about personal finances. If you can increase someone’s happiness right now, should you? 

Start the Conversation 

Regardless of whether you decide to pass some wealth today or wait until a future date, there's no reason not to begin the dialogue with your family to prepare them for it. The most important thing you can do is begin communication so they can educate themselves on the stewardship of that future gift. 

Setting expectations with your children about these assets is important for their day-to-day decision-making. For example, gifting assets today or knowing there will be some in the future may allow them to maximize retirement contributions and minimize current taxes. It also may allow them to buy larger blocks of life or disability insurance should something happen to them unexpectedly before receiving an inheritance. Protection for their family and themselves can allow for further peace of mind, assuming they are informed. This also helps open dialogue about their current situations that you, as a parent, can help them with. 

Surround Them with Good Advisors 

One thing you can also do is surround your children with good advisors. These may or may not be the same as your advisors, but consider searching out and paying for that advice so you can ensure they are not being led astray and potentially creating a mess to clean up later. Financial planning services can help them with financial literacy and provide an alternative sounding board that isn't necessarily a parent or relative. This further prepares them for independence and the ability to steward future assets when the parents are no longer there. 

Planning for Younger Children 

If the future generation is too young to communicate future wealth inheritances, then you should consider a trust structure that makes sense for the family. Questions of guardians, trustees of assets, and timing of inheritances need to be spelled out, should something unexpected happen to you. Clarifying those responsibilities today saves a judge from deciding for your children tomorrow, should you not be around to do so. As a suggestion, prepare documents with the most appropriate guardians and trustees for the present time, as they can always be changed later. We like to think of this as consideration for the next five years, not forever. It's important that you do not think of it as a permanent solution, which makes it more paralyzing. 

That said, with sizable estates, you may want to consider keeping assets in trust for your children's lifetime. This can protect them from creditors, lawsuits, and ex-spouses. While you may sacrifice a future step-up in basis on the assets, you gain protection while they are alive. 

Passing Along More Than Just Money 

Perhaps more important than passing down financial wealth to the next generation is passing along family values and generational stories. Generations sometimes have different priorities when it comes to what matters most to them. Discussing and passing on what is important to you is always better when you also value what is important to others. 
 
 

Involving Family in Philanthropy 

If philanthropy is important to you, there are countless ways to get your kids and grandkids involved at many levels. The use of donor-advised funds can allow for multiple people to direct charitable giving to causes that are important to them. Probably more important to families than the causes are the reasons why. If a discussion is had regarding why one values that charitable beneficiary, it may open the doors to future discussion about the greater good. 

Doing good for others creates happiness, and understanding others promotes better conversations and hopefully better outcomes. They say money doesn’t always make you happy, but creating financial and emotional happiness with open communication and understanding will go a long way. 
 
 

The Time to Start Is Now 

More than $124 trillion is set to change hands over the next two decades. The families who navigate this transition most successfully won't be those with the most assets; they'll be the ones who start the conversation today. Whether you choose to gift now or later, the key is preparing the next generation with the values, knowledge, and support they need to steward what you've built.