The Great Wealth Transfer

Happy New Year, dear readers!

During the break, I’ve been working on a new chapter for a forthcoming edition of a casebook on Trusts & Estates. The chapter centers on the federal gift and estate tax, generation-skipping transfer tax, and state estate and inheritance taxes. In doing my research for the chapter, I’ve scoured a wide array of sources, and in so doing, I went down a rabbit hole concerning estimates of just how much wealth will be transferred in the next 10-25 years. The estimates are staggering, with some pegging the intergenerational transfer of wealth to be around $105 trillion in the US between 2025-2050.

But these are just estimates of future totals. I think—indeed, I hope—that there is room for nonprofits to be beneficiaries of at least some of this wealth—not only to curb dynastic control of wealth held by the richest families, but also to promote their charitable endeavors. So, this blog post focuses on how nonprofits might leverage the current estate tax regime (and its charitable deduction) and trust structures to benefit from this monumental intergenerational wealth transfer.

Simplifying a bit, the federal estate tax applies to estates exceeding a substantial lifetime exemption threshold—currently $13.99 million per individual in 2025 but set to revert to pre-2017 levels after 2025 unless extended by Congress this year. But the charitable deduction lowers the tax base of a decedent’s gross estate. That is, the charitable deduction offers an unlimited reduction in taxable estate value for amounts left to qualified charities, making them one of the most effective tools for mitigating estate taxes. 

This creates a compelling incentive for wealthy individuals and families to explore tax-efficient strategies for transferring their wealth, particularly through charitable giving. By integrating charitable giving into estate plans, donors can reduce their taxable estates while ensuring that their wealth is directed toward causes they value. This creates a win-win scenario: donors preserve more of their legacy, and nonprofits gain the resources needed to drive impactful programs.

For example, a donor with a $20 million estate might use charitable bequests to bring their taxable estate below the federal lifetime exemption threshold, eliminating estate tax liability entirely. Alternatively, charitable remainder trusts (CRTs) and charitable lead trusts (CLTs) provide flexible mechanisms for donors to support nonprofits while also benefiting heirs. A CRT, for instance, allows donors to receive income for life (or a term of years), with the remainder passing to a nonprofit. These arrangements can significantly reduce estate taxes while maintaining income streams for donors or their families.

I think there is thus tremendous opportunity for nonprofits to benefit from the massive wealth transfer over the next quarter century. But they have to be savvy. By demonstrating a sophisticated understanding of estate planning tools and working closely with financial advisors, attorneys, and estate planners, nonprofits will be well-placed to attract transformational gifts.

Christopher J. Ryan, Jr.

Indiana University Maurer School of Law