How to prepare for intergenerational wealth transfer

Dec 13, 2021

Australia is on the brink of the largest intergenerational wealth transfer in history, with the baby boomer generation set to pass on more than $3 trillion dollars over the next 10-15 years according according to the Australian Financial Review. Millennials are likely to be the primary beneficiaries of that wealth. How that transfer happens needs careful thought and consideration to get it right.

The boomer generation (those born between 1946 and 1966) account for around 25 percent of the Australian population. But they hold about 50 percent of the country’s private wealth. And while it might seem simple to transfer the wealth to younger generations, the process is likely to present challenges for many. Knowing how to prepare for intergenerational wealth transfer will mean a smoother transition for many families who’ll need to deal with the situation sooner rather than later.

Preparation is the key. As is recognising there’s no one solution for everyone. What might suit one family may not suit another. What is common though, is in almost all successful intergenerational wealth transfers, conversations are had early. And beneficiaries should be usually included in the chat.

Although transferring wealth is usually well intended, if it’s poorly handled it can cause issues, resentment and even breakdowns in family relationships.

If done well though, it can make a positive difference to the recipient’s financial situation and life. And it ensures your wishes are being carried out as you intended.

Planning for wealth transfer between generations

Inheritance planning is rarely discussed within families. But planning when and how the wealth will be transferred needs consideration.

There are a lot of benefits to having open discussions within your family about how assets and future inheritances are treated.

Choosing to discuss your plan with beneficiaries will ensure that all those involved have a clear understanding about what you want to happen and how. Having a plan that everyone understands translates to the best outcomes for you and your recipients.

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No one best solution

One of the most important things to know is there’s no one-size-fits-all approach when it comes to successfully transferring your wealth. Having a well considered and clear to understand plan is key.

It’s often the fear of the unknown that usually leads people to indecision about what to do, rather than putting together a robust plan.

Not knowing how the transfer to their beneficiaries will impact their financial position over the long-term is a common reason preventing meaningful discussions.

How and when wealth is transferred is often postponed because people don’t know what to do first.

Wealth transfer before death

While having a well-considered and properly drawn up will is a necessity for anyone serious about achieving good outcomes, you don’t have to wait until you die before distributing your wealth.

If transferring your wealth before you die is something you’re considering, the first step is to get some professional advice.

Passing on your assets while you’re alive involves considering some things you need to be aware of before making the decision.

Some key questions to ask yourself include:

  • Will you leave yourself short if you live for longer or have more costs than expected?
  • Are there any costs involved in the transfer?
  • Will you or your beneficiaries be subject to tax implications?
  • Do you know what your beneficiaries actually want? Although this might seem like a good idea to you, do you know they feel the same way?

Chances are you won’t know the answers to all the questions right away. But knowing the steps to take, will let you navigate the answers to these questions and more.

Steps to successful wealth transfer

Considering the following steps as you plan for the future will set the foundation for a successful transfer of your money and assets:

  1. Discuss it with your family (or other recipients). Frank discussions about your expectations and being on the same page about what your preferences are is the first and most important step.
  2. Learn which financial management strategies are right for you. Understand the financial strategies and options available to you to ensure you set things up on the right path to achieve your goals.
  3. Consider your retirement. Chances are your retirement could be decades, not just a few years. Set realistic expectations about how you want your retirement to look. And be sure to plan for contingencies like unexpected health expenses, before committing to transferring your wealth to a younger generation.
  4. Get help from a professional. Professional financial planning help has been shown to improve the results for transferring wealth. Plus, you’ll get reassurance, practical advice and support when you need it.

Professional help when and where you need it

Intergenerational wealth transfer should always involve input from your solicitor. Combine this with the advice and guidance you can get from a trusted financial advisor and the often complex process, can seem a whole lot simpler.

Remove the emotion from the situation

Money can make us all emotional. But that emotion can get in the way of effective decision making. Enlisting the help of professionals with experience in successful intergenerational wealth transfer, lets you remove the emotion from the situation. Devising a plan that’s not rushed, nor emotive, nor unconsidered is essential to getting the right outcome.

Tribel Advisory are trusted professionals

Tribel Advisory is one of Australia’s leading financial planning services. We take pride in providing personalised advice, many clients are long standing and work closely with their individual financial advisor over time.

Delivering financial security and assurance, Tribel Advisory helps their clients to lead the lifestyle they want for themselves and their families. Because they create established connections with their clients, they better understand what it is they want to achieve.

If you need help planning for a smooth intergenerational wealth transfer, get in touch to find out how they can make the process as simple and smooth as possible for both you and your recipients.

All of the material published on this web site is for information purposes only and does not constitute advice. This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, we recommend you consider, with or without the assistance of a Financial Adviser, whether the information is appropriate in light of your particular needs and circumstances

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