The Great Wealth Heist: How Banks, Taxes, and Inflation Are Stripping Away Your Inheritance

What Happened

Over the next two decades, an estimated $84 trillion is set to change hands as Baby Boomers pass along their wealth and assets to younger generations.

Many financial experts are calling this the Great Wealth Transfer. However, the reality is closer to a wealth heist.

Banks, investment firms, and Uncle Sam himself are poised to take a massive chunk of the assets being passed down before any heirs ever see a dime.

Many are excited at the prospect of trillions of dollars flowing into the hands of Millennials and Gen Z households. But the reality is that much of that money will be siphoned off through taxes, fees, and other economic forces designed to shrink inheritances before they can build generational wealth.

Why it Matters

Baby Boomers are the wealthiest generation in American history. They’ve accumulated assets through decades of compound interest, rising real estate value, stock market booms, and relatively stable job markets.

Now, as many Boomers hit peak 65 and others are dying at higher rates, their children and grandchildren stand to inherit everything from expensive homes to lucrative investment portfolios. But inheriting money isn’t the financial jackpot many assume it to be.

Overlooked factors are already working to ensure that a significant portion of this wealth never reaches its rightful heirs. First, there are estate taxes. While only affecting estates worth over $13.61 million in 2024, this tax can take up to 40% of inherited assets before they even hit the next generation’s bank account.

Capital gains taxes are another hidden cost that can erode an inheritance. When heirs sell inherited property or stocks, they may owe taxes on any increase in value after they inherit it.

For instance, if a parent bought a home for $100,000 decades ago and it’s now worth $600,000, the heir benefits from a step-up basis. This means the home’s value is reset to $600,000 at the time of inheritance.

If they sell right away for that amount, there’s no capital gains tax. However, if they hold onto the property and later sell it for $700,000, they would owe capital gains tax on the $100,000 increase.

Depending on their income, the federal tax rate could be between 15% and 20%, leading to a tax bill of $15,000 to $20,000. On top of that, any state taxes would apply, reducing the actual value of their inheritance.

Meanwhile, financial institutions are positioning themselves to make a lucrative profit from the wealth transfer. Major investment firms have been rolling out inheritance-focused financial products and services, often bundled with high fees and commission-driven advisors looking to capitalize on the influx of inexperienced wealth holders.

Many banks now have 'wealth transition' departments, ostensibly to help heirs keep their money. However, these departments are actually designed to keep heirs locked into costly financial products.

A 2023 study by Cerulli Associates found that only 19% of heirs continue working with their parents’ financial advisors after inheriting. This forces firms to work even harder to keep control of these assets.

Inflation also plays a big role in eroding wealth. A cash inheritance worth $100,000 today won’t have the same purchasing power in a decade. With inflation averaging around 3% annually, that money could effectively lose over 25% of its value in just 10 years.

Rising costs in real estate, healthcare, and everyday goods mean that even those who inherit large sums may struggle to maintain financial security if they don’t invest wisely.

How it Affects You

For those expecting a sizeable inheritance in the coming years, the key to not getting robbed blind lies in preparation. Trusts can shield assets from excessive taxation, while careful tax planning can help avoid costly liquidation mistakes.

Working with a fiduciary financial advisor — one who is legally required to act in a client’s best interest, rather than push high-fee products — can ensure that inherited wealth isn’t lost to poor investment choices. For those inheriting property, understanding the step-up in basis rule can reduce capital gains taxes, preventing unnecessary losses when selling family homes or investments.

The Great Wealth Transfer should be a historic financial shift, but without proper planning, it could become a story of lost potential. Banks, tax agencies, and financial firms are already in a position to claim their share. The only question is how much you’re willing to let them take.