Understanding the Wealth Transfer
In the coming decades, the United States is expected to experience the largest intergenerational wealth transfer in history. Cerulli Associates projects that $124 trillion will change hands through 2048, with roughly $105 trillion going to heirs and $18 trillion to charity. More than 80 percent of it comes from Baby Boomers and older generations. While that influx of assets might seem straightforward at first glance, it carries complexities that extend far beyond the numbers. For the adult children who stand to inherit, understanding this transfer is not just about receiving wealth. It is about navigating everything that comes with it.
One detail in the Cerulli data deserves attention: about $54 trillion of the total will first pass horizontally to a surviving spouse, and nearly $40 trillion of that will go to widowed women. In practice, that means the typical family’s real inheritance event does not happen when Dad dies. It happens years later, when Mom dies, and often after the plan they wrote together has gone stale.
Wealth, in this context, is not limited to cash or investments. It includes real estate, retirement accounts, family businesses, heirlooms, and sometimes debts. Each asset type carries its own considerations, including tax treatment, legal responsibilities, and emotional weight. Inheriting the family home in Bethesda or Potomac might feel like a gift, but it also comes with upkeep, property taxes, and the potential for disputes if siblings have different views on what to do with it. We wrote about the mechanics of that specific problem in How Can I Make Sure My Children Inherit My Home?.
Wealth transfer is also deeply tied to family dynamics. It can bring families closer together, or it can amplify existing tensions. Inheritance acts as a magnifying glass for unresolved issues, unspoken expectations, and differing financial philosophies. If family members have not discussed these dynamics ahead of time, the period following a loved one’s passing can become not just emotionally taxing but financially and legally complex.
“The families who end up in my office fighting are almost never the ones where somebody was greedy. They are the ones where nobody talked. Dad assumed the kids knew what he wanted, the kids assumed there was a plan, and by the time anyone looked, the person who could have answered the questions was gone.”
— Jeffrey D. Katz, Managing Partner, JDKatz, P.C.
An often-overlooked aspect of this transfer is timing. Many adult children assume they will inherit at an advanced age themselves, but rising life expectancies cut both ways. Parents are living longer, and a long life can deplete wealth in ways families do not anticipate, most commonly through long-term care. In Maryland, a single year in a nursing home can cost well over $150,000 and Medicaid will not step in until most of the assets are gone. For heirs, that means the size of the inheritance is often decided by whether the parents did any Medicaid and elder law planning while they still could. Our guide to Medicaid Planning in Maryland explains the five-year look-back and why last-minute transfers usually backfire.
The cultural shift around discussing money also plays a role. Older generations were often taught that financial matters are private, which creates barriers to open conversations about estate planning. For their children, this means navigating blind spots about their parents’ wishes and the structures already in place, or, in some cases, the lack of them. Miscommunication and assumptions in these situations lead to unmet expectations and unprepared heirs.
Finally, there is the less tangible but equally important aspect of inherited wealth: its emotional weight. Money passed down from a parent often feels more personal than income earned independently. It may be tied to a family’s history, values, or sacrifices made by earlier generations. While it can represent opportunity, it can also evoke guilt, pressure, or confusion about how best to honor the family legacy. Understanding that layer is as important as understanding the financial mechanics.
Initiating Conversations with Parents
Talking to your parents about their financial plans can feel like stepping into uncharted territory, especially if money has historically been off limits in your family. The key is framing the discussion around care and shared values rather than the inheritance itself. That mindset creates a collaborative and less intimidating dynamic for everyone involved.
Open-ended, thoughtful questions are a gentle way to begin. Asking your parents about their long-term goals, preferred living arrangements, or thoughts on legacy can pave the way for deeper discussions. Instead of asking directly about a will or account balances, you might say, “What would you like to see happen with the house down the road?” or “How can I best support your plans for the years ahead?” Questions like these feel less transactional and more aligned with their values.
There is a real mismatch in perception here. According to Pew Research, 61 percent of parents age 65 and older say they have discussed how their assets will be distributed with their adult children, but only 51 percent of adult children with aging parents say that conversation has happened. That ten-point gap is the distance between what parents think they have communicated and what their children actually heard. It highlights why clear, ongoing conversations matter more than a single talk.
“Clients tell me all the time, “My kids know what I want.” Then I ask if the kids know where the documents are, who the personal representative is, or whether the beneficiary on the IRA is still the ex-spouse. Usually the answer is no. Knowing what someone wants and being able to carry it out are two very different things.”
— Jared B. Stape, Partner, JDKatz, P.C.
Another way to foster dialogue is to frame the discussion around planning for potential challenges. You might raise scenarios such as unexpected medical costs or prolonged care needs and ask how they would like to prepare. This reinforces that the conversation is about their comfort and security rather than their assets.
Timing matters. Bringing this up during a holiday gathering or when emotions are already running high tends to backfire. Look for a calm, private moment when you can speak without distractions. Be patient if the first conversation does not produce clear answers or a detailed plan. Many families need several discussions to build the trust this topic requires.
Listen actively. This is not only about getting answers. It is about building mutual respect. If your parents express hesitation, acknowledge it and reassure them that your primary concern is making sure their wishes are honored. Patience and empathy go a long way toward easing apprehension.
Sometimes a neutral professional makes the process feel less personal. If your parents are resistant, suggesting a joint meeting with an estate planning attorney shifts the focus to expert advice rather than a family confrontation. Our Estate Planning Checklist is a useful starting point for that meeting because it turns an abstract conversation into a concrete list of questions.
Consequences of a Lack of Planning
Failing to address estate planning leaves families vulnerable to avoidable problems that ripple through both their finances and their relationships. Without a will or a comprehensive plan, distributing assets becomes far more complicated. In Maryland, the estate is opened with the Register of Wills in the county where the decedent lived, and the process can take a year or more for a contested or complicated estate. Delays restrict access to inherited funds and drain the estate’s value through fees and administrative costs. Our post on how to start administering an estate walks through what that process looks like from the personal representative’s side.
When there is no will, the court does not guess what the decedent wanted. It applies a statutory formula. Under Maryland’s intestacy statute, if a married parent dies leaving adult children, the surviving spouse takes the first $100,000 plus one-half of the balance, and the children divide the rest. In a second-marriage family, that is frequently the exact outcome nobody intended. Stepchildren, who have no intestate rights at all, are the most common casualties. Our overview of who qualifies as a beneficiary of a Maryland estate covers the distinctions.
The absence of a plan also invites conflict. Even families with harmonious relationships face misunderstandings when no clear guidance is left behind. Items of sentimental value, real estate decisions, or differing financial priorities among siblings escalate quickly into disputes, and some of those rifts never heal.
The numbers show how common this is. Pew reports that 66 percent of adults in their 70s and about 80 percent of those 80 and older have a will, but only 46 percent of adults in their 60s and one-third or fewer of those under 60 do. Trust & Will’s 2026 Estate Planning Report puts the share of Americans with no estate plan at all at 56 percent. For those left behind, the cost shows up as unexpected taxes, legal fees, and creditor claims that erode the inheritance, plus the immediate pressure of covering funeral expenses and debts during an already painful time.
Maryland adds a wrinkle that surprises many families: it is the only state with both an estate tax and a separate inheritance tax. Children, grandchildren, stepchildren, parents, and siblings are exempt from the inheritance tax, but a bequest to a niece, nephew, cousin, friend, or a child’s spouse is taxed at a flat 10 percent. See Md. Code, Tax-Gen. §§ 7-201 to 7-204 And while the federal estate tax exemption is now $15 million per person, Maryland’s exemption remains fixed at $5 million and is not indexed for inflation. A paid-off house in Montgomery County, a federal retirement account, and a life insurance policy can reach that threshold faster than most families expect. We explain the planning options in How Can I Avoid Estate Taxes in Maryland?.
Beyond money and relationships, the practical consequences of not planning are most severe in cases of incapacity. Without a durable power of attorney and an advance directive, decisions about medical care and financial management fall to the court through a guardianship proceeding rather than to trusted family members. Guardianship in Maryland is public, expensive, and slow, and it strips the parent of legal autonomy in a way a well-drafted power of attorney never would. Maryland offers a statutory power of attorney form that financial institutions are required to honor See Md. Code, Est. & Trusts § 17-202], but it only works if it is signed while the parent still has capacity. For adult children, that is the single most time-sensitive reason to start the conversation now.
“The call I dread is the one where an adult child says, “Mom had a stroke last week, and I need to get access to her accounts.” At that point a power of attorney is no longer an option. We are talking about guardianship, which means a court, a lawyer for Mom, a lawyer for the child, and months of delay. A document that would have taken an hour to sign is now a six-month court case.”
— Jeffrey D. Katz, Managing Partner, JDKatz, P.C.
Delays in planning are usually rooted in discomfort with discussing money or mortality. Yet these conversations, while difficult, are essential. Missteps or inaction cascade into preventable problems, turning what should be an opportunity to honor a loved one’s legacy into a complicated, contentious, or costly process.
The Inherited-IRA 10-Year Rule
When it comes to inheriting an IRA, there is a rule many beneficiaries overlook until it is too late. The SECURE Act of 2019 requires most non-spouse beneficiaries to withdraw the entire balance of an inherited IRA within ten years of the original owner’s death. At first glance that sounds manageable, but the financial consequences become expensive quickly if the rule is misunderstood.
The challenge lies in taxation. Distributions from a traditional inherited IRA are ordinary income to the beneficiary. If the account is substantial and the withdrawals are concentrated in a short period, they push the beneficiary into a higher bracket. For a two-career household in the Washington suburbs already in the 32 or 35 percent federal bracket, plus Maryland and county income tax, a $1 million inherited IRA compressed into a decade is frequently the largest single tax event of the beneficiary’s life. Roth IRAs are subject to the same ten-year emptying requirement, but the distributions are generally tax-free.
The old “stretch IRA,” which allowed beneficiaries to spread distributions over their own life expectancy, is gone for most non-spouse heirs. That compresses the timeline for tax-deferred growth and eliminates decades of compounding that younger beneficiaries once enjoyed.
One point that is widely misreported: the ten-year rule does not always mean you can wait until year ten. Under final IRS regulations issued July 18, 2024, if the original owner had already reached the age at which required minimum distributions begin, the beneficiary must also take annual required distributions in years one through nine, with the balance emptied by the end of year ten. The IRS waived those annual distributions for 2021 through 2024, but they are required beginning in 2025. The penalty for a missed required distribution is a 25 percent excise tax, reduced to 10 percent if corrected promptly.See IRC § 401(a)(9)(H); Treas. Reg. § 1.401(a)(9)-5; IRS Notices 2022-53, 2023-54, 2024-35 If the owner died before reaching that age, the beneficiary has flexibility to take distributions in any pattern, as long as the account is empty within ten years.
That flexibility places the burden entirely on the beneficiary to plan withdrawals in a way that minimizes tax. Beneficiaries juggling student loans, retirement savings, and day-to-day expenses are tempted to defer until the last possible moment. Waiting until year ten to take the full balance creates a perfect storm: one enormous distribution stacked on top of a year of ordinary income. Spreading withdrawals across lower-income years, or timing them around a sabbatical, a job change, or retirement, preserves significantly more of the inheritance.
Surviving spouses, minor children of the account owner (until age 21), disabled or chronically ill beneficiaries, and beneficiaries not more than ten years younger than the owner are “eligible designated beneficiaries” who retain more favorable treatment, including a spouse’s ability to roll the account into his or her own IRA. For everyone else, including adult children, there is little room for error.
“The IRA is usually the largest asset a client leaves behind that has never been taxed, and it is the one asset where the parents’ planning and the children’s planning have to line up. A trust that made perfect sense for a house can wreck the tax treatment of a retirement account if it was not drafted with the ten-year rule in mind. We look at the beneficiary designations before we look at the will.”
— Jared B. Stape, Partner, JDKatz, P.C.
The key to navigating the ten-year rule is proactive planning, ideally before the account owner dies, and coordinated advice afterward. This is an area where your parents’ estate planning attorney, your CPA, and your financial advisor need to be talking to each other. Our discussion of when a child should receive an inheritance covers how trusts can be structured to control timing without losing tax efficiency.
The Step-Up in Basis: Why “Just Give It to the Kids Now” Usually Backfires
One of the most common instincts among aging parents, and one of the most expensive, is to transfer the house or the brokerage account to the children during life to “avoid probate.” Assets received by gift carry the parent’s original cost basis. The same assets inherited at death receive a new basis equal to fair market value on the date of death. IRC §§ 1014, 1015 For a Bethesda home purchased in 1985 for $200,000 and worth $1.4 million today, that difference is more than $1 million of capital gain that simply disappears if the house passes at death rather than by gift.
With the federal estate tax now irrelevant to nearly every family, the basis step-up is frequently worth far more than any estate-tax savings a lifetime gift might produce. Lifetime gifts also start the clock on Maryland’s five-year Medicaid look-back, which can disqualify the parent from long-term care coverage at the worst possible moment. There are situations where a lifetime transfer to an irrevocable trust makes sense, particularly for Medicaid planning, but it needs to be designed to preserve the step-up. Our trusts practice page explains the options.
Strategies for Effective Communication
Discussing estate plans with parents is challenging when emotions, family history, or cultural norms complicate the dialogue. Approach these conversations with empathy and patience. Acknowledge how personal the topic is, and emphasize that your goal is to understand and support their wishes rather than impose your own. Avoid assumptions about what they want. Ask open-ended questions focused on their values and priorities, which lead naturally to specific plans.
The setting matters as much as the words. Choose a calm, low-pressure moment when neither of you feels rushed. Avoid family gatherings and emotionally charged situations, which heighten tension and make constructive dialogue harder.
If money has always been a sensitive subject, ease in through related topics. Ask about their thoughts on long-term care, where they want to live as they age, or how they picture leaving a legacy. These smaller conversations pave the way for deeper ones over time.
Perceptions differ between generations here too. Pew found that only 44 percent of parents over 65 have discussed their preferred living arrangements with their adult children, and only 43 percent of adult children say that conversation has happened. Living arrangements are the topic families avoid most, and they are the one that determines whether the inheritance survives at all.
When your parents express concerns, listen without judgment. Reassure them that you are not trying to dictate their choices; you want their wishes documented so they can be carried out without stress or confusion. Validation builds trust, especially with parents hesitant to open up.
If conversations stall, a neutral third party can help. An attorney can depersonalize sensitive topics and provide clear guidance on the legal mechanics. Proposing a joint meeting shifts the focus toward actionable steps. This is an iterative process, not a single discussion, so be prepared to revisit the topic as comfort grows.
“Nearly half of our estate planning meetings now include an adult child in the room, and I think that is healthy. The parent is still the client and still makes every decision. But the child leaves knowing where the documents are, who to call, and what the plan actually says. That one meeting eliminates most of the panic that otherwise happens at two in the morning in a hospital hallway.”
— Jeffrey D. Katz, Managing Partner, JDKatz, P.C.
Financial Literacy and Preparedness
Financial literacy is a crucial skill for managing an inheritance. Without a working understanding of the basics, it is easy to make decisions that trigger unintended tax consequences or forfeit opportunities. Preparing now helps you maximize what you inherit and avoid costly mistakes.
Start with taxes, investments, and retirement accounts, since those sit at the center of most inheritance decisions. Understanding how traditional IRAs, Roth IRAs, and taxable brokerage accounts are treated helps you plan withdrawals and investments effectively, particularly under the ten-year rule. Familiarity with capital gains tax, the Maryland and federal estate tax thresholds, and the stepped-up basis clarifies how inherited assets are treated. If your parents own property in Virginia, which has no estate or inheritance tax, our guide to inheritance law in Virginia explains how the rules differ across the river.
Estate planning is not only about distribution. It often requires managing wealth over time. If you inherit real estate, you will need to evaluate property taxes, maintenance, and potential rental income. If you inherit an investment portfolio, understanding asset allocation and risk management allows you to make decisions aligned with your own goals rather than simply preserving your parents’ choices.
Financial literacy also means preparing for inheritance-related expenses. Families underestimate the immediate costs: legal fees, debts left behind, and funeral expenses. Being prepared ensures you are not caught off guard during an already emotional time.
The literacy gap tracks the income gap. Among adults over 70, 83 percent of higher-income adults have a will, compared to 51 percent of lower-income adults. That disparity underscores why financial literacy matters at every income level. A modest estate handled badly can be lost entirely; a modest estate handled well can change a family’s trajectory.
Building financial literacy is not about mastering everything at once. It is about incremental steps: deepening your understanding, asking the right questions, and seeking advice when you need it. With the right preparation, you will be better equipped to make informed decisions, honor your family’s legacy, and secure your own financial future.
A Practical Next Step
If you are the adult child in this story, the most useful thing you can do is not to draft your own estate plan. It is to sit down with your parents and find out whether theirs works. JDKatz offers a second-opinion review of an existing estate plan, and we regularly host family meetings where parents and adult children hear the same explanation at the same time. Our step-by-step guide to creating an estate plan in Maryland describes what a complete plan includes, and our Estate Planning Checklist is a good list to bring to the first conversation. Our book, Finding Safe Harbor, is available on the kindle web store for free download for Kindle subscribers, or can be purchased for $24.95 from Amazon. https://a.co/d/9et8KQK
JDKatz, P.C. serves families throughout Montgomery County, the District of Columbia, and Northern Virginia from our office at 4800 Montgomery Lane, Suite 600, Bethesda, MD 20814. Call (301) 913-2948 or visit www.JDKatz.com to schedule a consultation.