Generational wealth

What It Means

Generational wealth is money, property and other assetsAssetsThings you own that are worth money, such as cash, investments, a home or a car. Your assets minus your debts is your net worth. See more that one generation of a family passes on to the next. A Federal Reserve research note describes two routes: direct transfers, such as an inheritance or a gift during a parent's lifetime like help with a down paymentDown paymentThe share of a home's price you pay upfront in cash when you buy it; the mortgage covers the rest. See more, and indirect ones, such as paying for a child's education. Economists call the process intergenerational wealth transmission.

How People Say It

• "We want to leave the kids something."
• "My parents helped with the down payment, and that changed everything."
• "Paying for college is our version of generational wealth."

The Breakdown

An example family. Grace and Tom, both 62, want to help their two adult children buy homes. They plan to give each child $30,000 in 2026 toward a down payment, written as one check from Tom's account.

Where it goes wrong. The IRS annual exclusion for gifts in 2026 is $19,000 per giver, per person receiving. A single $30,000 check from Tom to each child is above his $19,000 exclusion for each of them, so he may need to file a gift tax return. Split between the two parents, the same $30,000 is $15,000 from each, inside both exclusions.

What to watch for

• The paperwork. A deed, account list or will nobody can find doesn't pass anything on smoothly.
• Indirect help counts too. The Fed's note treats investing in children's education as a way wealth moves between generations.
• Big estates. For people who die in 2026, the IRS basic exclusion amount for the estate tax is $15,000,000.

Good to Know

The IRS's 2026 inflationInflationA general rise in the prices of goods and services over time, so the same amount of money buys less than it did before. See more adjustments keep the annual gift exclusion at $19,000 and set the basic exclusion amount for estates of people who die in 2026 at $15,000,000. That annual figure can change from year to year, so check the IRS figures for the year you give. Gift and estate rules have details this page doesn't cover, including gifts to a spouse who isn't a US citizen, so talk to a tax professional or an estate attorney before a large gift or when writing a will.

Related Terms and Categories

• Net worth

  What you own minus what you owe: the value of your savings, investments, home and other assets, less your mortgage, loans and card balances.

• Assets

  Things you own that are worth money, such as cash, investments, a home or a car. Your assets minus your debts is your net worth.

• 529 plan

  A state-sponsored, tax-advantaged account for education costs, where growth is free of federal income tax when spent on qualified expenses.

• Custodial account

  An account an adult manages for a minor, usually under state UGMA or UTMA law, where the money legally belongs to the child from the day it goes in.

• Compound interest

  Interest paid on your original amount and on the interest it has already earned, so each year's interest is a little bigger than the last.

• Financial goals

  Specific targets for your money, such as an emergency fund, paying off a card or a down payment, each with an amount and a date.

Saving and investing basics