The Transfer of Family Wealth

In Australia over the next 20 years it is estimated that $3.5 trillion (yes, trillion!) in wealth will be transferred from the Baby Boomer generation to Gen X and beyond through inheritances and gifts [SA1] *.


This movement of wealth, commonly referred to as the tongue-twisting “intergenerational wealth transfer”, is essential in helping those receiving the wealth achieve a financially successful and secure future into their retirement.


But with younger generations living longer than ever before, it can be difficult to know what exactly you can do to ensure that you and your loved ones are equipped with the knowledge and tools you need to manage this transfer of wealth successfully.


In order to help you get started, we’ve shared a few ways you can consider how to manage or receive this wealth transfer (depending on which side of the transfer you are on!).


1. Have A Frank Conversation With Your Family About Inheritance


For many, the cultural taboos surrounding money and family expectations mean that you’ve likely never had the all-important discussions with your loved ones surrounding inheritance. But, in order to ensure the passing on of wealth in your family is utilised in a way that is constructive to your financial future, it’s essential you take the time to have a frank conversation about your expectations.


If you’re a member of the older generation of Australians and want your wealth to contribute to a specific legacy or cause after you’re gone, it’s important your family is made aware of this so they can uphold your wishes and account for the impact this will have on their inheritances.


And if you’re a member of the younger generation, you may be planning on using your inheritance to pay off your mortgage or top-up your savings for retirement. It’s always a good idea to share these plans with your parents or grandparents, to make sure you’re all on the same page for the amount of money that will be transferred (if known) and how it can best be utilised to help you build a brighter financial future.


2. Learn More About Wealth Management Strategies


Once you’ve discussed the above, it’s essential you take time to understand (or teach your inheritors about) the financial strategies available that can help you successfully manage and grow a sudden increase in wealth.


This is where a professional wealth management advisor can really help you on your journey to achieving financial success and security. You see, a professional can help you identify the financial strategies and paths available to you and decide on what will best suit your particular financial goals and needs. In some circumstances, they can also coach and guide your family conversations and help set expectations.


3. Set Realistic Expectations for Your Retirement


Unlike our grandparents’ generation, who on average worked until 60 and kicked the bucked just 12 year’s later; the current and future generations are likely to live well into our 90’s. If you plan to retire at 60, that could leave a whopping 30 years without an annual salary to plan for.

When you combine this with statistics from the McRindle Wealth Transfer Report - which claims that when Gen X are retiring from the workforce a comfortable, self-funded retirement is likely going to require between $2.09 and $3.98 million in savings – the importance of successfully utilising your inheritance to grow your wealth can’t be stressed enough!


One way you can ensure you’re correctly utilising any sudden growth in wealth is to set a realistic expectation of what you’d like your retirement to look like and make sure your financial plan matches these goals. Now being realistic doesn’t have to mean looking forward to a retirement of counting every penny, but it does mean taking the time to work out your priorities when it comes to what a comfortable retirement means for you.


Once you have a clearer picture of what the ideal retirement looks like to you, identifying which financial strategies can help you successfully grow your wealth and achieve this retirement becomes much simpler.


4. Seek Guidance from A Professional


Research shows that, time after time, professional financial planning not only helps those receiving advice to comfortably achieve their financial goals but also to sleep better at night knowing that their financial world is taken care of. That’s why we keep banging on about this, it really is important.


And when it comes to ensuring you’re successfully using an inheritance or gift to build a brighter financial future, having guidance is essential to achieving your financial goals.


* Source - Australian Bureau of Statistics (2016) ‘Talking ‘bout our Generations: Where are Australia’s Baby Boomers, Generation X & Y and iGeneration?’, https://www.abs.gov.au/ausstats/abs@.nsf/ Previousproducts/3235.0Feature%20Article12014


General Advice Warning

The information contained in this article has been provided as general advice only. The contents have been prepared without taking account of your personal objectives, financial situation or needs. You should, before you make any decision regarding any information, strategies or products mentioned in this article, consult your own financial advisor to consider whether that is appropriate having regard to your own objectives, financial situation and needs.


[SA1] Source Australian Bureau of Statistics (2016) ‘Talking ‘bout our Generations: Where are Australia’s Baby Boomers, Generation X & Y and iGeneration?’, <https://www.abs.gov.au/ausstats/abs@.nsf/ Previousproducts/3235.0Feature%20Article12014>