Written by: Julie Baird | First American Exchange Company
Over the next decade, Millennials and Gen Z will inherit more wealth than any generation in modern history. Estimates range from $84 trillion and $124 trillion, with much of that tied to real estate. For financial, tax, and estate advisors, this unprecedented transfer represents a challenge as well as an opportunity to guide the next generation of clients through complex, high-stakes decisions.
However, inheriting wealth does not automatically mean benefiting from it. Inheriting property is very different from turning that inheritance into lasting value.
Whether the real estate being inherited is a family home, commercial building, or a rental property, the decisions these younger generations make after receiving those assets can shape their financial future. Advisors are often the first, and most trusted, resource that heirs turn to as they attempt to understand their options. This is where understanding tax-deferral strategies, 1031 exchanges and estate planning fundamentals come into play. For advisors working with Millennial and Gen Z clients who are set to receive real estate assets, the ability to clearly explain these tools can be the difference between preserving wealth and unintentionally eroding it.
Your Client Inherited the Property… Now What?
Younger generations often receive real estate that has been in the family for years, and, in many cases, these properties have accumulated significant capital gains. When a person passes away and leaves property to their heirs, the tax implications can be substantial. However, there is a principle known as the step-up in basis, which can help reduce the tax burden for beneficiaries. Helping clients understand how and when this applies is often one of the most immediate value-adds an advisor can provide. In many cases, proper application of this concept can mean the difference between a large tax bill and paying nothing at all.
A step-up in basis refers to the readjustment of an asset’s valuation for tax purposes when it is inherited. Specifically, when someone inherits property, the asset’s cost basis (the original value used to determine capital gains) is “stepped up” to its current fair market value (FMV) at the time of the decedent’s death.
Let’s break this down using an example. If a person purchases a stock for $50,000, that original purchase value is considered their basis. If that stock appreciates over time and is worth $150,000 at the time of their death (the “date of death valuation”), and it is then inherited by a beneficiary, the beneficiary’s new cost basis becomes $150,000 because of the “step-up” principle. If the beneficiary sells the asset immediately at that price, they owe no capital gains tax. This step-up in basis effectively erases $100,000 in unrealized gains for tax purposes.
For advisors, translating this same concept to inherited real estate, which is often the largest asset on a client’s balance sheet, is crucial to helping heirs make informed decisions early in the process.
Why Early Advisor Involvement Matters
What often separates positive outcomes from costly mistakes is early planning. Decisions made in the first year after inheritance can have lasting consequences. Advisors who are engaged early can help clients slow down, evaluate their full range of options, and avoid emotionally driven or rushed decisions that permanently limit flexibility.
The imminent generational wealth transfer to Millennials and Gen Z represents a rare opportunity. For advisors, it is also a chance to build long-term, multi-generational relationships by showing value at a pivotal life moment. With the right investment and ownership approach, inherited real estate can become a foundation for long-term stability and future growth. Without it, much of that wealth can quietly disappear through taxes, inefficiencies, and missed opportunities. Understanding the fundamentals is only the beginning; the real impact comes from proactive and well-coordinated guidance and the decisions that follow.
Up next: Selling, reinvesting, or repositioning inherited real estate from an advisor’s perspective.
Related: AI Innovation Triggers Software Repricing Across Public and Private Markets