Intergenerational wealth transfer is often discussed as though it occurs through a single event—an inheritance “payout.” In practice, larger transfers typically reflect a longer process: the accumulation of assets that appreciate over time, the use of legal structures to manage control and timing, and tax rules that treat income, appreciation, and transfers differently.

This essay describes (1) the main mechanisms used to pass wealth across generations in the United States, (2) the scale of the relevant taxes in current law, and (3) the principal arguments—both supportive and critical—offered by advocates and opponents of the current framework. Where evidence is available, it is summarized quantitatively; where data are limited, uncertainties are made explicit.

1) The institutional baseline: what is taxed, when, and how often

Three broad tax regimes shape outcomes:

Current federal thresholds (2026)

For 2026, the federal estate-tax filing threshold is listed as $15,000,000 per decedent.
For gifts, the annual exclusion is $19,000 per recipient (2026).

How many estates pay the federal estate tax?

The federal estate tax applies to a small portion of deaths. Statistics from the Urban-Brookings Tax Policy Center show that taxable estate tax returns were 0.08% of adult deaths in 2019 (2,129 taxable returns out of 2.82 million adult deaths). A Congressional Research Service summary similarly reports 0.07% of deaths for taxable estates in 2019.

How much revenue do federal estate and gift taxes raise?

Federal estate and gift taxes are a small share of total federal revenue. CRS reports FY2023 revenue of about $32 billion (0.7% of federal revenues). The Congressional Budget Office reports that in 2020, federal estate and gift tax revenues totaled $17.6 billion (about 0.1% of GDP).

State taxes can also matter. The Tax Policy Center reports that 17 states and the District of Columbia levy some form of estate or inheritance tax, and state/local governments collected $6.7 billion in 2021 from those taxes. 

2) Common mechanisms used to pass wealth across generations

A. Holding appreciating assets, often without selling

A foundational difference between high-wealth and middle-wealth balance sheets is composition. High-wealth households typically hold a larger share of resources in assets whose value can compound (e.g., diversified public equities, private businesses, investment real estate). Wealth transfer then becomes less about “passing cash” and more about transferring ownership claims.

B. Borrowing against assets rather than selling them (“Buy, Borrow, Die”)

A widely discussed strategy—sometimes summarized as “Buy, Borrow, Die”—involves:

1. buying appreciating assets,
2. borrowing against them to fund spending without selling, and
3. transferring assets at death in ways that may reduce capital gains taxation on lifetime appreciation.

The Bipartisan Policy Center describes this pattern and discusses policy options focused on “step up” in basis and securities-backed borrowing.

Borrowing against securities is typically done via securities-backed lines of credit; FINRA provides a plain-language description of how such credit lines function (collateralized by securities, often interest-only payments, and subject to collateral-value risk).

What is well established: borrowing against assets can provide liquidity without triggering a sale.

What is less certain: comprehensive measurement of how frequently this strategy is used at the very top, because borrowing is privately arranged and not fully observable in public tax data (researchers infer usage from related data and case evidence). 

C. Basis rules for inherited assets (“step-up in basis”)

Under current law, many inherited assets receive a basis adjustment to fair market value at death (often described as “stepping up” basis). In practical terms, that means post-inheritance capital gains are measured relative to the value at inheritance, not the decedent’s original purchase price.

This feature of the system is central to both how wealth is transmitted and to the policy debate, because it can reduce capital gains taxes that would otherwise be due upon sale.

D. Trusts and entities: separating control, ownership, and tax exposure

Wealthy households often use trusts and family entities (e.g., family LLCs or family limited partnerships) to:

• define who benefits (and when),
• protect assets from certain risks (creditors, divorce, governance disputes),
• centralize management,
• and in some circumstances influence how certain illiquid interests are valued for transfer-tax purposes.

What is well established: these structures can shape timing, control, and administrative outcomes.

What is contested: the extent to which valuation practices systematically reduce transfer-tax exposure versus serving governance and business continuity goals; the answer can depend heavily on facts and implementation.

E. Retirement accounts as inheritances: distribution rules constrain timing

Retirement accounts can be inherited, but required distribution rules can shape the tax burden on heirs. Internal Revenue Service guidance and publications describe the “10-year rule” that applies to many beneficiaries for deaths after 2019, with important exceptions for “eligible designated beneficiaries.” 

3) What these mechanisms add up to, in practice

A useful way to summarize the “wealth transfer toolkit” is by the problem each tool is designed to solve:

4) The policy debate: arguments and evidence from proponents and opponents

The debate over wealth-transfer rules is not only about “how” wealth is transmitted but also about “whether” the rules should be changed. Below is a structured presentation of the principal arguments.

A. Arguments commonly offered by proponents of the current framework

B. Arguments commonly offered by opponents (or reform advocates)

5) Facts, uncertainties, and what is difficult to measure

What is relatively well documented

• Estate-tax coverage is narrow at current thresholds: roughly 0.07–0.08% of deaths were associated with taxable estate returns in 2019.
• Federal estate and gift tax revenues are modest in federal budget terms (tens of billions annually).
• Step-up in basis exists as a general rule for many inherited assets, and it reduces taxable gains measured from the decedent’s original purchase price.
• Beneficiary distribution rules for inherited retirement accounts impose timing constraints on many heirs (notably the 10-year rule for many beneficiaries for post-2019 deaths).

What remains uncertain or contested

• Prevalence and scale of “Buy, Borrow, Die” usage. Researchers can describe the mechanism and point to securities-backed borrowing markets, but comprehensive, public measurement of who borrows, how much, and how systematically borrowing substitutes for selling remains limited.
• Behavioral responses to reform. Revenue estimates for changes to basis or taxation at death depend heavily on behavioral assumptions: whether households sell earlier, shift portfolios, increase tax planning, or move assets into exempt forms.
• Distributional and economic effects. Competing models emphasize different channels—capital formation, entrepreneurship, inequality, and administrative complexity—making “net impact” difficult to settle empirically with a single estimate.

6) Conclusion

Wealth transfer in the United States is shaped less by a single legal “trick” than by the interaction of asset appreciation, borrowing, and the tax system’s different treatment of income, gains, and transfers. For most households, federal estate taxes are not the binding constraint; the more consequential issues are often liquidity, paperwork, and the design of inheritances such as retirement accounts. For high-wealth households, however, basis rules, the timing of realization, and carefully drafted governance structures can substantially affect after-tax outcomes and the degree of control retained across generations.

The policy debate is therefore best understood as two related questions. First, descriptively: how the system operates and who it affects (where coverage and revenue are comparatively well measured). Second, normatively: what the objectives of tax and inheritance policy should be—efficiency, simplicity, fairness, and the extent to which intergenerational transmission should be taxed—where evidence exists but uncertainty and value judgments play a larger role.