Tax Advisers Can Ease ‘Great Wealth Transfer’ Despite Unknowns

The Great Wealth Transfer, long discussed as a key financial milestone, is no longer in the distant future.

Gen X, Millennials, and even Gen Z aren’t just inheriting wealth—they are actively consolidating it, leveraging their financial power, and taking control of their financial futures. With unprecedented access to information and opportunities, they are making more strategic and informed decisions to maximize their influence and impact.

Tax implications are a critical consideration as wealth moves from one generation to the next. Younger investors are more attuned to tax strategies that preserve wealth, including tax-advantaged investment accounts, real estate, side hustles, and strategic gifting to help optimize the potential for long-term financial growth. And they expect tax advisers to provide tailored guidance on mitigating taxes.

Younger generations also have an increasing preference for integrating technology into their financial planning. They expect their advisers to use advanced technology to streamline processes and provide data-driven insights that may help secure their financial futures and optimize their tax approach.

The looming uncertainty of tax laws, particularly around estate planning and wealth transfer, makes this advice even more crucial. Many provisions of the Tax Cuts and Jobs Act of 2017, such as the increased estate and gift tax exemption, are set to expire at the end of this year.

While some provisions may be extended, tax professionals must guide clients through this uncertainty by optimizing strategies such as estate and gift tax planning, maximizing tax-advantaged accounts, and potentially using donor-advised funds. Such measures can help mitigate future tax liabilities and aid efficient wealth transfer across generations.

Wealth managers must work closely with clients to navigate these estate tax plans, gift tax strategies, and trust structures. Proactively using current estate and gift tax exemptions before they expire can enable clients to transfer substantial wealth with potentially reduced tax exposure.

Additionally, use of the annual gift tax exclusion or employment of appropriate trust structures—such as irrevocable life insurance trusts or charitable remainder trusts—can help shield assets from estate taxes by reducing the overall taxable estate, helping to preserve wealth for future generations.

Roth conversions also may reduce future taxable income, especially if higher tax rates are anticipated to end before the end of 2025. By engaging in proactive planning now, individuals can better position themselves to benefit from current opportunities and prepare for potential changes.

The key is to provide holistic, forward-thinking planning that addresses the evolving tax landscape and seeks to ensure the wealth transfer is executed in the most tax-efficient way possible. Working closely with financial advisers to anticipate changes can help mitigate risks, allowing wealth to be preserved and passed on across generations.

By focusing on the consolidation of wealth, integration of technology, and alignment of investment strategies with clients’ values, advisers can help clients secure their future. The challenge, and opportunity, lies in understanding these trends and ensuring that financial advice meets the needs of this new generation of wealth holders.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Lisa Roberts is head of wealth at Wilmington Trust.

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