Many cultures share the truism of shirtsleeves to shirtsleeves in three generations, indicating the challenges that family dynasties face in retaining massive wealth across several generations. The Mars family, famous for M&Ms and other candies, offer a contemporary “success” story.

The federal estate, gift, and generation-skipping transfer (GST) taxes are designed to tax larger wealth transfers from one generation to another. This chapter explains how each works and assesses their effectiveness.

These taxes generate $30 billion annually, or less than 1 percent of federal revenues. Recent increases in exemption levels – to over $13 million and double that for married couples – mean very few decedents actually pay these taxes. In effect, these progressively designed taxes affect only the extremely rich.

The prime beneficiaries of this leaky tax system are White households. In 2022, they reported receiving 93 percent of all bequests and gifts. This is despite the fact that Black households give in greater numbers and attach a higher value to leaving a legacy than do White households.

Due to state laws that undermine the rule against perpetuities, the uber rich can now create dynasty trusts that protect their trust assets while assuring that future generations will reap large incomes.