We are living through the most significant transfer of wealth in human history. Over the coming decades, baby boomers are expected to pass down an estimated $84 trillion to their heirs and charities. This massive shift will reshape families, communities, and the entire economy.
For families who have worked hard to build wealth, the question is simple but daunting: How do you make sure it lasts?
The statistics are sobering. A twenty-year study by the Williams Group found that 70% of wealthy families lose their wealth by the second generation, and 90% lose it by the third. This pattern is so typical that cultures around the world have sayings for it. The Chinese warn that “wealth does not last three generations.” The English say “shirtsleeves to shirtsleeves.”
The good news? With the proper planning, your family can be part of the 10% that breaks the cycle.
Why wealth disappears
Before we talk about solutions, we need to understand the problem. Surprisingly, wealth loss is rarely about bad investments or market crashes.
Research discussed by Roy Williams and Vic Preisser in their book, Preparing Heirs, shows that most failed transfers of family wealth are not caused by poor investment or tax planning, but by family dynamics. The primary reasons are a lack of communication and trust among family members, while technical financial mistakes account for only a small percentage of failures.
Here is the typical pattern. The first generation builds wealth through hard work and sacrifice. They remember lean times and respect every dollar. The second generation watches their parents struggle and gains some appreciation for money, even if they live more comfortably. The third generation only knows abundance. They have no memory of sacrifice and often lack the skills to manage what they inherit.
The Vanderbilt family is a cautionary tale. Cornelius Vanderbilt left his heirs the equivalent of over $100 billion in today’s dollars. At a family reunion in 1973, not a single one of the 120 descendants in attendance was a millionaire.
The tax landscape in 2026
The One Big Beautiful Bill Act, signed into law on July 4, 2025, brought welcome clarity to estate planning. The federal estate and gift tax exemption is now permanently set at $15 million per individual, or $30 million for married couples. This amount will continue to be adjusted for inflation each year.
This means most families will not face federal estate taxes. If your estate is worth less than $15 million as an individual or $30 million as a couple, you can pass everything to your heirs free of federal estate tax.
The annual gift tax exclusion remains at $19,000 per recipient in 2026. You can give $19,000 to as many people as you want each year without filing a gift tax return or using any of your lifetime exemption. A married couple can give $38,000 per recipient.
For those with larger estates, the generation-skipping transfer tax exemption also sits at $15 million per individual. This tax applies when you transfer assets directly to grandchildren or more remote descendants, skipping a generation.
Keep in mind that state estate and inheritance taxes still apply in many jurisdictions. These often have much lower exemption thresholds than the federal government.
Start with communication
The most effective wealth transfer strategy has nothing to do with trusts or tax codes. It starts with talking to your family about money.
Many parents avoid these conversations. They worry that telling children about an inheritance will destroy their ambition or create a sense of entitlement. This instinct is understandable but counterproductive.
Children who are blindsided by an inheritance often mishandle it. They have not been prepared for the responsibility. They do not understand the family’s values around money. They make impulsive decisions during an emotional time.
Families that successfully preserve wealth approach things differently. They hold regular family meetings about finances. They involve children in discussions about charitable giving, investment decisions, and family goals. They treat wealth as a tool for achieving shared purposes rather than a secret to be revealed after death.
Start simple. Talk about your values. Explain how the family’s wealth was created. Discuss what you hope it will accomplish for future generations. These conversations build the trust and understanding that keep families together across generations.
Educate the next generation
Financial literacy does not happen automatically. The average adult answers only about 50% of basic personal finance questions correctly. Without intentional education, heirs will struggle to protect and grow their inheritance.
Start early with age-appropriate concepts. Young children can learn about saving and spending. Teenagers can grasp budgeting, compound interest, and the basics of investing. Young adults should understand tax planning, estate documents, and fiduciary responsibility.
Consider involving your children in managing family assets. Let them sit in on meetings with your financial advisor. Give them small amounts to invest and learn from their mistakes while the stakes are low. Some families create junior advisory roles or require heirs to complete financial education programs before receiving distributions.
Studies and practitioner experience consistently show that families who prioritize financial education and prepare heirs for responsibility are far more likely to preserve wealth across multiple generations.
Use trusts strategically
Trusts are the workhorses of multi-generational wealth transfer. They let you control how and when assets are distributed, protect wealth from creditors and divorce, and minimize taxes across generations.
A dynasty trust is designed to hold and manage assets for multiple generations while avoiding estate taxes at each transfer. In states that have eliminated the rule against perpetuities, these trusts can last forever. When properly structured and allocated, GST-exempt assets can grow without being subject to the 40% estate tax each time they pass to the next generation.
Generation-skipping trusts transfer assets directly to grandchildren while using your GST exemption to minimize taxes. Spendthrift trusts protect heirs who might not be ready to handle large sums responsibly. The trustee controls distributions and can tie them to milestones like completing a degree or maintaining employment.
Charitable remainder trusts let you support causes you care about while maintaining income during your lifetime and providing tax benefits. The remainder is distributed to charity upon the trust’s termination.
The proper trust structure depends on your specific goals, family dynamics, and the size of your estate. Work with an experienced estate planning attorney to design a solution tailored to your situation.
Make gifts during your lifetime
Lifetime gifting is one of the most powerful tools for reducing your taxable estate while watching your family benefit from your generosity.
A couple with three children and six grandchildren could transfer $342,000 annually just through annual exclusion gifts. Over twenty years, that adds up to nearly $7 million moved out of their estate tax-free.
For larger transfers, you can use your $15 million lifetime exemption. Consider gifting assets that are likely to appreciate significantly. If you transfer stock worth $1 million today that grows to $5 million over the next decade, all that appreciation happens outside your taxable estate.
Direct payments for tuition (excluding room and board) and medical expenses made directly to the provider are unlimited and do not count against your annual or lifetime exemptions. You can pay your grandchild’s college tuition directly to the university without any gift tax implications.
Giving while living has another benefit beyond tax savings. You get to see your family enjoy your gifts and can guide their responsible management.
Create a family governance structure
Wealthy families that maintain their wealth across generations often operate more like organizations than households. They have formal structures for decision-making, conflict resolution, and preparing the next generation for leadership.
A family mission statement articulates your shared values and the purpose of your wealth. It guides decisions about investments, distributions, and philanthropy. When disagreements arise, family members can refer back to these foundational principles.
Regular family meetings create a forum for discussing financial matters, updating everyone on the status of family assets, and making collective decisions. These meetings build the trust and communication habits that prevent wealth loss.
Some families establish family councils or advisory boards that give younger members a voice in governance before they take on full responsibility. Others create family offices to manage investments, tax planning, and administrative tasks professionally, typically for families with substantial or highly complex wealth.
The specific structure matters less than having one at all. Formality reduces emotional decision-making and ensures that everyone understands their roles and responsibilities.
Work with professionals
Multi-generational wealth transfer is complex. It requires expertise in estate law, tax planning, investment management, and family dynamics. No single professional has all these skills.
Your team should include an estate planning attorney who understands the latest laws and trust structures. A CPA or tax advisor ensures your strategies are tax-efficient. A financial advisor or wealth manager handles investments and helps coordinate the overall plan. Some families also work with family wealth consultants who specialize in the human side of wealth transfer.
Introduce your children to these professionals before an inheritance. Building relationships during calm times makes the transition smoother when it eventually happens.
Review your plan regularly. Tax laws change. Family circumstances evolve. A plan created ten years ago may no longer fit your current situation.
The bottom line
Multi-generational wealth transfer is not just about moving money from one generation to the next. It is about passing down values, teaching responsibility, and creating structures that help your family thrive long after you are gone.
The families that succeed focus on communication and education as much as tax strategies. They involve their children in financial decisions. They create governance structures that prevent conflict. They use trusts and gifting strategies to protect and grow assets across generations.
The good news is that the tools and strategies for preserving wealth are well-established. You have every opportunity to put them to work.
