Estate Planning and Generational Wealth Strategies

What is generational wealth planning?

Millennials alone are expected to inherit approximately $46 trillion over the next 25 years, according to Cerulli Associates.¹

Generational wealth planning helps what you’ve built reach the next generation in the most complete form possible—with minimal tax erosion, a clear structure for transferring assets, and enough guidance for heirs to steward that wealth responsibly.

Depending on your situation, that may involve:

• Keeping more wealth in your family’s hands and paying less in taxes and fees
• Creating a clear roadmap for how assets should be passed down
• Helping future generations manage wealth responsibly
• Passing down financial values as part of your legacy

Without a plan, your wealth can gradually be diminished by taxes, probate costs, family disputes, or poor financial decisions. However, with a thoughtful estate plan, you can create a roadmap for preserving both assets and family intentions across generations.

How estate tax planning can help preserve more wealth for your heirs

One of the biggest threats to generational wealth isn’t necessarily market volatility or poor investment returns—it’s taxes. Cerulli estimates that more than $62 trillion of the wealth expected to transfer through 2048 will come from households that are currently high-net-worth or ultra-high-net-worth.¹

For families with larger estates, federal estate taxes can greatly reduce the amount that ultimately reaches children, grandchildren, or other heirs. The top federal estate tax rate is currently 40% on assets above the basic exclusion amount.^2,3

For an estate of $16 million and a 2026 basic exclusion of $15 million, that means the last million could be subject to a 40% estate tax.

However, there are several strategies you could use to reduce this tax burden:

• Using irrevocable trusts to remove assets from a taxable estate
• Structuring charitable gifts
• Using life insurance to provide liquidity or replace wealth lost to taxes
• Making lifetime gifts within annual gift tax exclusion limits

Annual gifting can help transfer wealth during your lifetime

One of the simplest estate planning strategies is also one of the most overlooked: giving assets away while you’re still alive.

The annual gift tax exclusion allows you to give up to a certain amount each year to as many people as you’d like without reducing your lifetime estate and gift tax exemption.³

Going back to the $1 million example above, imagine you have two children and four grandchildren. If the annual gift tax exclusion is $16,000 per recipient, you could transfer up to $96,000 per year ($16,000 × 6 people) without reducing your lifetime estate and gift tax exemption.

Annual gifting can be powerful because it lets you see the impact of your wealth during your lifetime. Rather than waiting to transfer assets through an inheritance, you can help family members reach important goals now while gradually reducing the size of your taxable estate. A financial professional can help ensure those gifts support your broader estate planning objectives.

Life insurance can help transfer wealth efficiently

One challenge with generational wealth planning is that not all wealth is liquid. If your heirs receive a sizable inheritance but relatively little cash, they could be forced to sell off assets if taxes, legal expenses, and other settlement costs come due.

Life insurance can help solve this problem because the death benefit can pass to beneficiaries income-tax-free. Your heirs could then use these funds to cover expenses without having to quickly sell real estate, investments, or a family business.

There are other ways to use life insurance for estate planning too.

For example, if a permanent life insurance policy is owned by an irrevocable life insurance trust (ILIT), the death benefit may be excluded from the taxable estate while still benefiting future generations.

Survivorship life insurance policies, sometimes called second-to-die policies, are another option. These policies insure two people (often spouses) and pay a death benefit after the second person passes away.

Trusts can help protect wealth across generations

One concern many parents and grandparents have is what happens after the inheritance is received. Will the money be spent quickly? Could it be lost in a lawsuit or creditor claim? What if an heir is still too young to manage a large inheritance responsibly?

Trusts can help address those concerns by giving you more control over how and when assets are distributed.

For example, a trust might allow assets to be distributed gradually over time rather than as a lump sum. It can also specify conditions for distributions, such as reaching a certain age, completing an education, or meeting other milestones.

Some types of trusts are designed to last for multiple generations.

• Dynasty trusts are long-term trusts that can hold and protect assets for children, grandchildren, and future generations who aren’t yet born.
• Testamentary trusts can be useful if you’re less concerned about taxes and more concerned about control. Because it’s created through your will, it allows you to leave instructions for how inherited assets should be managed after you’re gone.

Passing on values can be just as important as passing on assets

Many families view generational wealth planning as more than a transfer of assets. They also want to pass down the values, knowledge, and decision-making skills needed to manage that wealth responsibly.

For some families, this means involving adult children in family financial discussions or explaining the “why” behind trusts and other estate planning strategies. You may even want to get a jump-start on teaching younger generations about investing, charitable giving, and long-term stewardship.

Why generational wealth planning is a team effort

When you have generational wealth, estate planning is often a team effort.

For instance:

• An estate planning attorney can create any legal documents you need.
• A CPA can help keep tax implications in check.
• A financial advisor can help you coordinate other financial pieces, including insurance policies, named beneficiaries, and trust funding.

Just as important, estate planning professionals can help you stay aligned over time. If your family grows, tax laws change, assets appreciate, or new goals develop, regular reviews can help your estate plan continue to reflect your wishes.

Frequently asked questions