What is the Great Wealth Transfer?

The Great Wealth Transfer refers to the unprecedented movement of trillions of dollars in assets from older generations (Baby Boomers and older) to younger generations (Gen X, Millennials, and Gen Z) over the coming decades. It's driven by demographic shifts and accumulated wealth.

How much wealth is expected to transfer in the Generational Wealth Transfer?

According to Cerulli Associates, an estimated $84.4 trillion in wealth is projected to transfer between generations in North America over the next 25 years, with the majority coming from estates.

Do I pay taxes on inherited money?

Generally, heirs do not pay federal income tax on the inherited principal itself. However, income generated by the inherited assets after you receive them (e.g., dividends, interest, rental income) is taxable. Federal estate tax only applies to very large estates, and some states have their own estate or inheritance taxes.

What is a stepped-up basis for inherited assets?

A stepped-up basis means that for inherited assets like stocks or real estate, the asset's cost basis is reset to its fair market value on the date of the original owner's death. This often significantly reduces or eliminates capital gains tax if you sell the asset shortly after inheriting it.

What should I do first after inheriting a large sum of money?

After inheriting a large sum, the first step is typically to avoid making hasty decisions. Take time to understand the assets, consult with a financial advisor, estate attorney, and tax professional, and develop a comprehensive plan before making major changes or investments.

How can I protect inherited wealth for future generations?

To protect inherited wealth for future generations, consider establishing your own comprehensive estate plan, including wills and potentially trusts (such as revocable or irrevocable trusts). These legal structures can help manage assets, avoid probate, and ensure wealth is distributed according to your wishes.

Is it better to pay off debt or invest an inheritance?

The decision to pay off debt or invest an inheritance depends on the type of debt and your financial situation. High-interest debt, like credit card balances, should generally be prioritized for repayment. For lower-interest debt, like a mortgage, investing the inheritance might offer a higher return, but this decision should be made with a financial advisor.

Generational Wealth Transfer Preparedness Guide | One…