The "great wealth transfer" is underway. Cerulli Associates projects that $124 trillion will change hands through 2048, most of it from Baby Boomers and older generations to Generation X and Millennial heirs, as well as to charities. For families, the challenge is how to preserve that wealth and prepare the next generation to manage it.

Key Elements of a Multigenerational Wealth Strategy

Successfully transferring wealth across generations requires a comprehensive and long-term approach. There are key elements of a cross-generational wealth management strategy that families employ.

· Establishing a vision – Families must have a clear understanding of their financial goals for both the present and the future. This vision should incorporate the family's values, traditions, and ambitions. It should also provide guidance on managing wealth in the future.

· Education and communication – It’s vital that each generation understands that financial matters are vital for successful wealth management. Effective communication within the family can help them understand the shared vision and the strategies being employed to attain it.

· Adhering to an investment strategy – The strategy should be designed to address the family's long-term financial objectives while managing risk and adapting to changing economic circumstances.

· Estate planning – Estate planning can help prevent a significant erosion of wealth due to tax liabilities. Wealth is transferred according to the current generation's wishes, while minimizing the impact of taxes on heirs.

Steps to Build a Cross-Generational Wealth Plan

There are several steps that families can implement to create a robust, cross-generational wealth management strategy.

· Regular family meetings – These meetings help foster open discussions about wealth management and provide an opportunity to share experiences, express concerns, and align generations on the family's financial vision.

· Education – Family members should be educated about financial matters from an early age. This education can include financial literacy programs, mentorships, or paid internships. Financial advisors can also provide insights and guidance.

· Transparent decision-making – Transparency is critical as it allows each family member to understand the decisions being made and their future implications.

· Collaboration with professionals – Trusted financial, insurance, legal, and tax professionals can provide families with the guidance they need to manage their wealth. Each plays a critical role in creating and implementing a comprehensive wealth management plan.

Tax Rules Heirs Should Know

· Estate tax exemption – In 2026, the federal estate tax exemption is $15 million per person ($30 million for married couples), indexed for inflation beginning in 2027. Arizona does not have a state estate or inheritance tax.

· Step-up in basis – Inherited investments and real estate generally receive a new cost basis equal to their value at death, which can reduce capital gains taxes for heirs. Arizona is a community property state, so community property may receive a step-up on both halves when the first spouse dies.

· Inherited IRA 10-year rule – Most non-spouse beneficiaries must withdraw the full balance of an inherited IRA within 10 years. If the original owner had already begun required minimum distributions, annual withdrawals may also be required during that period.

Family Wealth FAQs

What is the 10-year rule for inherited IRAs?

Most non-spouse beneficiaries who inherit an IRA must empty the account by the end of the 10th year after the owner's death. Spouses, minor children, disabled or chronically ill beneficiaries, and beneficiaries not more than 10 years younger than the owner may qualify for other options.

What is a step-up in basis?

A step-up in basis resets the cost basis of an inherited asset to its value at the owner's death. If an heir later sells, capital gains are generally calculated from that stepped-up value rather than the original purchase price.

Managing wealth across multiple generations is no simple task. But with clear communication, a disciplined strategy, and coordinated professional guidance, families can work toward preserving their wealth and preparing the next generation to manage it.