As Australia’s wealthiest generation, the Baby Boomers, enter retirement, many are starting to consider the fate of their wealth after they pass away. Their children are expected to be the primary beneficiaries of an estimated $5 trillion wealth transfer. However, grandchildren are also likely to benefit as people live longer and inheritances are passed on later.
A significant concern for retirees is the fear that their heirs might squander the inheritance. Nevertheless, there are ways to ensure some control over one’s wealth even after death.
COMMUNICATE EARLY
Open discussions about inheritance and estate planning with loved ones are crucial to prevent family disputes after one’s passing. Clear communication can help address grievances and avoid legal battles over perceived entitlements. Discussing assets and obtaining feedback can also impact future financial decisions, including moves into aged care.
UTILIZE TRUSTS
Setting up a testamentary trust through your will is an effective way to safeguard an inheritance. These trusts provide tax and asset protection benefits, allowing parents to designate experts to manage the assets temporarily. Testamentary trusts can span multiple generations, protecting children from potential issues arising from second marriages or new relationships.
IMPLEMENT TRANSITION PERIODS
Consider implementing a transition period in the testamentary trust. This involves appointing the children as co-trustees alongside the executor or an adviser for a set period, such as two years. During this time, beneficiaries can learn to manage the trust, maximize its benefits, and make informed financial decisions
STAGGER INHERITANCE
Parents can stagger the inheritance to gradually transfer wealth to their children. For example, they might give $100,000 at age 21 and the remaining estate share at 25. This approach provides beneficiaries with investment experience and financial management skills, reducing the likelihood of making costly mistakes.
CHARITABLE GIVING
Allocating a portion of your estate to charities can prevent heirs from misusing the entire legacy. Many affluent older Australians are leaving money to charities or establishing charitable trusts, ensuring that their wealth benefits others for years to come. This practice can also inspire future generations to give back.
Ensuring your family’s wealth is passed down smoothly requires thoughtful planning and expert guidance. Whether you’re looking to create a comprehensive estate plan, set up a trust, or simply want to explore your options, our team is here to help. Don’t leave your family’s future to chance—contact our office today to schedule a consultation. Together, we can build a lasting legacy that honours your values and secures your family’s financial future for generations to come.
