October 20, 2025
Filed under: Wealth in Families
As we enter tax season, it’s the perfect time to take a broader view of your family’s tax strategy. At Omega, we specialize in working with multi-generational families, and we consistently uncover opportunities to optimize tax outcomes across generations.
When we talk about “tax planning,” we’re really referring to two key areas:
- Income Tax Planning
- Estate Tax Planning
These areas often overlap, and effective planning requires a deep understanding of your family’s financial landscape—not just names and ages, but goals, income levels, and legacy intentions.
Income Tax Planning Across Generations
Understanding the tax brackets of both the current generation (“Gen 1”) and the “Rising Generation” is essential. This insight allows us to make strategic decisions—like Roth IRA conversions or IRA beneficiary designations—that can reduce the overall tax burden for the entire family.
Example:
If Gen 1 is in a lower tax bracket than their heirs, converting traditional IRAs to Roth IRAs during their lifetime can be advantageous. This strategy minimizes the tax impact when the Rising Generation inherits these accounts, especially given the 10-year distribution rule for inherited IRAs, which could otherwise push them into higher tax brackets.
In three-generation families, we may recommend splitting IRA beneficiary designations between adult children and grandchildren. This approach can spread out the tax liability, potentially lowering the overall tax impact while still preserving wealth across generations.
Effective multi-generational income tax planning requires collaboration between your wealth management team and tax professionals, along with a comprehensive understanding of each generation’s financial picture.
Estate Tax Planning with a Long-Term Lens
Smart estate tax planning begins with proactive lifetime income tax strategies. With the current federal estate tax exemption at $15 million per person, many families may avoid federal estate taxes—but state estate taxes can still pose a significant challenge.
Looking ahead, incorporating lifetime gifting strategies to family members or charities can help reduce future estate tax liabilities. Of course, every tax-saving strategy involves trade-offs—typically in the form of relinquishing control or access to assets.
Example:
We recently helped a multi-generational family reduce future estate taxes by transferring assets into irrevocable trusts for their adult children. While this typically means forfeiting a “step-up” in cost basis at death, we leveraged prior investment losses to offset gains on the assets sold into the trust—effectively creating a “step-up” at the time of transfer. These trust assets will benefit the next generation without being included in their estates, potentially saving substantial state estate taxes.
Planning When There’s No “Next Generation”
For families without heirs, the focus shifts to maximizing lifetime income tax efficiency and charitable impact.
Example:
Roth IRA conversions can reduce future Required Minimum Distributions (RMDs), but if assets are ultimately going to charity—which receives IRA assets tax-free—it may not make sense to pay taxes now. In these cases, a nuanced approach is key. Partial Roth conversions, combined with strategic charitable giving, can balance tax efficiency with philanthropic goals.
Using advanced tax planning software and close coordination with your CPA, Omega helps ensure your strategy is both thoughtful and optimized—avoiding missed opportunities and maximizing impact.
Final Thoughts
Multi-generational tax planning isn’t just about saving money—it’s about aligning your financial legacy with your family’s values and long-term goals. Let’s explore how a more integrated approach can benefit your entire family, now and for generations to come.
lisa