Overlooked estate planning moves: How the Generation-Skipping Transfer Tax helps protect generational wealth

Estate planning helps transfer wealth efficiently while reducing tax burdens and protecting your heirs from unnecessary financial stress. As wealth transfers across generations, many families are facing estate planning challenges they never anticipated.

In the previous article in this series, we explored a common misconception about revocable trusts and the primary residence capital gains exclusion. Now, we turn our focus to the bigger picture: how the largest intergenerational wealth transfer in history is reshaping estate planning strategies—and why failing to prepare for taxes like the Generation-Skipping Transfer Tax (GSTT) could cost your heirs far more than expected.

The Trillions in Wealth Transfers & What It Means for Your Estate

Boomers are in the midst of transferring $72 trillion to their heirs—an unprecedented shift in wealth. The largest share, $53 trillion, is coming from Baby Boomers (born 1946–1964), while an additional $15.8 trillion is being passed down by the Silent Generation (born 1928–1945).

This massive transfer raises two major concerns. First, can younger generations afford to maintain inherited assets? Rising property taxes, maintenance costs, and shifting economic conditions may make it challenging for heirs to hold onto family properties. Second, are families prepared for the tax liabilities that come with inheriting wealth? Without careful planning, heirs may face unexpected estate, capital gains, or GSTT, potentially forcing them to sell assets to cover tax obligations.

Tip: With more wealth transferring than ever before, your estate plan should account for how your heirs will manage and sustain inherited assets.

The Overlooked Impact of the Generation-Skipping Transfer Tax (GSTT)

Many families are surprised to learn than passing wealth directly to grandchildren or younger heirs can trigger a hefty 40% tax. The GSTT applies when assets skip a generation—whether by design (naming grandchildren as direct beneficiaries) or unintentionally (if children pass away first).

Why This Matters Now:

• Many trusts established after 1986 (when GSTT was enacted) are now seeing the first major wave of taxable transfers.
• If trusts contain real estate or business assets, heirs may need to sell them to cover unexpected tax bills.

Tip: If your estate plan involves multigenerational beneficiaries, work with your advisor to assess GSTT risks and create a liquidity plan.

Assess Wealth Transfer & Tax Implications

• Work with your advisor to evaluate GSTT risks in your estate.
• Identify opportunities to allocate GSTT exemptions before assets pass to the next generation.

Prepare for the Future of Multigenerational Wealth

• If you’re passing down illiquid assets (family business, real estate), develop a liquidity strategy to handle tax burdens.

We Can Help

A well-structured estate plan is key to protecting your family’s financial future. With trillions in wealth set to transfer, now is the time to review your strategy, reduce tax liabilities, and prepare your heirs for what’s ahead.

Don’t let unexpected tax burdens, probate issues, or liquidity challenges force difficult decisions on your beneficiaries. Our team at Elliott Davis can help you assess risks, enhance tax strategies, and create a plan that protects your legacy.

Connect with us today to secure your estate plan for the next generation.

The information provided in this communication is of a general nature and should not be considered professional advice. You should not act upon the information provided without obtaining specific professional advice. The information above is subject to change.