What is "The Great Handover" in generational wealth transfer?

“The Great Handover” refers to the largest intergenerational transfer of wealth in history, primarily from Baby Boomers and the Silent Generation to their Millennial and Gen Z heirs. Estimates suggest trillions of dollars will transfer in the coming decades, significantly reshaping the financial landscape.

How much wealth is expected to be transferred during The Great Handover?

According to a 2024 report by Cerulli Associates, an estimated $84.4 trillion is projected to transfer between 2023 and 2045 in the United States. The majority of this, around $72.6 trillion, is expected to come from estates.

What are the main tax implications of receiving an inheritance?

The principal amount of an inheritance is generally not subject to federal income tax for the beneficiary. However, some states levy estate or inheritance taxes. Inherited retirement accounts (like Traditional IRAs) are subject to income tax upon withdrawal, typically under the 10-year rule for non-spouse beneficiaries. Appreciated assets like stocks or real estate benefit from a "stepped-up basis," reducing capital gains tax for the heir.

How should Millennials and Gen Z responsibly invest inherited wealth?

Responsible investing involves setting clear financial goals, understanding your risk tolerance, diversifying your portfolio across various asset classes, and leveraging tax-advantaged accounts like 401(k)s, IRAs, and HSAs. Many younger investors also consider sustainable and impact investing to align their portfolios with their values.

What is a stepped-up basis, and why is it important for inherited assets?

A stepped-up basis means that when you inherit an asset (like stocks or real estate), its cost basis for tax purposes is reset to its fair market value on the date of the original owner's death. This significantly reduces or eliminates capital gains tax if you sell the asset shortly after inheriting it, as you only pay tax on appreciation since the date of death.

Do I need a will or trust if I receive an inheritance?

Yes, it's highly advisable to have a will and consider a trust, especially after receiving a significant inheritance. A will ensures your assets are distributed according to your wishes and allows you to name guardians for minor children. Trusts offer greater control, privacy, and potential tax advantages, helping protect and manage your wealth for future generations.

When should I consult a financial advisor about inherited wealth?

You should consult a financial advisor if you receive a substantial inheritance, are unsure about tax implications, need help creating an investment strategy, want to establish an estate plan, or are dealing with complex family dynamics related to the inheritance. A qualified advisor can provide personalized guidance and help you make informed decisions.

Generational Wealth Transfer: Preparing for The Great…