Over the next two decades, Baby Boomers – those born between 1946 and 1964 – will pass down an unprecedented amount of wealth. Estimates range from $30 trillion to more than $120 trillion shifting primarily into the hands of Gen X, Millennials, and Gen Z by the mid‑2040s. Economists have dubbed this moment “the Great Wealth Transfer,” and its scale is poised to reshape financial markets, consumer behavior, and philanthropic landscapes for decades. Yet despite its magnitude, many Baby Boomers have not formalized a strategy for transferring their wealth efficiently. Some assume the process will be seamless; others expect their heirs to “figure it out later.” But failing to plan can introduce significant taxes, legal complications, family conflicts, and unintended outcomes.
What do Baby Boomers need to do to help ensure a smooth transition?
We feel that Baby Boomers can help can ensure a smooth wealth transition by first organizing a complete inventory of their assets, including real estate, investment accounts, retirement plans, insurance policies, and liabilities, so heirs and advisors have a clear roadmap of what exists. They should create or update essential estate documents – wills, trusts, financial and medical powers of attorney, and all beneficiary designations – so assets transfer efficiently and according to their intentions. In almost all situations, the beneficiary listed will trump any names listed in the will, which is a reminder to always check the beneficiaries during reviews.
Just as critical is organizing and securely storing digital access information, such as passwords for financial accounts, email, online bill‑pay, and cloud storage, in a protected document or password manager, with clear instructions on where it can be found. Boomers should also communicate openly with heirs about their plans to reduce confusion and conflict, especially when it comes to complex assets like family property or businesses. Finally, partnering with estate attorneys, financial advisors, and tax professionals helps ensure the plan is tax‑efficient, legally sound, and regularly updated as life circumstances evolve.
What should be done to help minimize taxes?
To help minimize taxes when passing wealth to the next generation, we feel that Baby Boomers should incorporate several key strategies into their estate plan. First, they can reduce the size of their taxable estate through annual and lifetime gifting, gradually moving assets to heirs tax‑free under current IRS limits. Second, establishing trusts – especially irrevocable or generation‑skipping trusts – can help transfer assets outside the taxable estate while adding guardrails and allowing for long‑term tax efficiency. Third, because beneficiary designations override the will, Boomers should regularly update beneficiaries on retirement plans, annuities, and life insurance to help ensure the most tax‑efficient transfer of those assets.
A major tax‑reduction strategy involves understanding the step‑up in cost basis, which applies to many assets handed down at death. When an heir receives certain appreciated assets, the cost basis resets to the asset’s market value on the date of death, eliminating capital gains that accumulated during the original owner’s lifetime. Common assets that receive a step‑up in basis include:
- Primary residences and vacation homes
- Taxable investment accounts, including stocks, bonds, and mutual funds
- Privately held real estate, such as rental properties
- Interests in privately held businesses
These step‑ups can dramatically reduce future capital‑gains tax liability for heirs. (Note: Retirement accounts such as IRAs and 401(k)s do not receive a step‑up in cost basis.)
Retirement accounts instead fall under rules created by recent legislation, most notably the 10‑year rule. For most non‑spouse beneficiaries, inherited IRAs and 401(k)s must now be fully distributed within 10 years of the original owner’s death. This can create significant tax exposure because each withdrawal is treated as ordinary income. Boomers can plan around this by using Roth conversions, strategic beneficiary designations, or trusts tailored for retirement accounts to help their heirs avoid large, forced taxable withdrawals later.
Finally, Boomers may reduce their overall taxable estate through charitable giving, using tools such as donor‑advised funds or charitable trusts, and by coordinating all these strategies with estate planning attorneys, financial advisors, and tax professionals who can ensure documents are aligned, updated, and optimized over time.
What should they be investing in now to grow and preserve their wealth in advance of passing it on to younger generations?
Baby Boomers preparing to transfer wealth to younger generations may benefit from focusing on diversified, tax‑aware investment approaches that align with their financial goals, time horizon, and risk tolerance. This often includes using active and passive equity funds, high‑quality fixed‑income investments, and tax‑managed accounts, which can support a disciplined and efficient long‑term strategy. Real estate, whether a primary residence, rental property, or vacation home, can also play an important role in multigenerational planning, especially when ownership structures are arranged in ways that simplify eventual transfer. Boomers may also consider life insurance as a tool to provide liquidity or help balance inheritances when certain assets are difficult to divide. Additionally, preparing for future medical needs through long‑term care insurance or hybrid coverage can help safeguard other assets intended for heirs. By working with financial, tax, and estate‑planning professionals, Boomers can build an investment and protection strategy that fits their unique circumstances and supports their long‑term legacy goals.
The information contained in this article does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Evan Russell and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Past performance does not guarantee future results. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Round Table Advisors is not a registered broker/dealer and is independent of Raymond James Financial Services, Inc. Investment advisory services offered through Raymond James Financial Services Advisors, Inc.
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