Planning for a smooth wealth transfer

Australians inherited an estimated $150 billion in 2024, an increase of more than 70 per cent over the past decade, according to a report by JBWere. ⁱ This figure is expected to grow rapidly over the next 20 years, reaching $5.4 trillion, highlighting the scale of the intergenerational wealth transfer currently underway.

Managing this flow of wealth within families can be complex, particularly in situations involving divorce, remarriage, and blended families. Without careful planning, these dynamics can lead to disputes and legal challenges.

Legal firms report a steady rise in will disputes, with adult children the most likely to contest. One firm estimates that over 60 per cent of claims are brought by adult children, and around 20 per cent by partners or ex-partners. ⁱⁱ

Yet, many people still do not have a will.

According to the latest research from the Australian Law Reform Commission, nearly 40 per cent of adult Australians do not have a valid will. However, this figure drops to just 7 per cent among those aged over 70. ⁱⁱⁱ

If you die intestate (without a will) in Australia, your estate is distributed according to state or territory laws, which vary slightly across jurisdictions. Generally, assets are passed to the next of kin, starting with a surviving spouse or partner, followed by children, parents, siblings, and then other relatives. If no relatives can be located, the estate may be claimed by the government.

If it’s important to you to have a say in how your assets are distributed, having a valid will is essential.

For those in a new partnership with children from a previous relationship, a binding financial agreement can also be a valuable tool to protect your partner’s interests if something happens to you. This is a legally enforceable contract that outlines how assets, liabilities, and responsibilities will be divided in the event of separation, divorce, or death.

Designing your wealth transfer

Whether you choose to distribute your wealth during your lifetime or after your passing can depend on family dynamics, any business interests, and whether you have a passion for creating a legacy such as donating to charity. Alternatively, you may prefer to focus on enjoying your later years with your partner.

With the ongoing housing crisis and the rise of the ‘Bank of Mum and Dad’, many Australians are choosing to transfer wealth during their lifetime. You might wish to help your children or grandchildren get into their home, contribute to their superannuation, or assist with school fees or student loans. However, it’s essential to seek professional advice, especially if you receive government entitlements, as gifting lump sums could affect your eligibility.

Another option is establishing a testamentary trust, commonly used to provide financial security for beneficiaries such as family members or loved ones. This type of trust is created through your will and takes effect upon your death. It is administered by a trustee, nominated in your will, who takes legal control of the trust assets and distributes them according to your instructions.

A testamentary trust can also offer potential tax advantages, but it’s important to work with a financial adviser who will help you consider whether it’s the right strategy for your circumstances.

Some people may prefer to establish or contribute to a charitable foundation as a way of building a family legacy. This approach allows you to guide how your wealth is distributed and can involve family members, helping them gain experience in philanthropy and shared values.

Most importantly, creating a lasting legacy depends on the strength of family relationships. Disputes often intensify after a death, and strained relationships can complicate matters. It’s wise to discuss your intentions with family members and other beneficiaries, be transparent about your plans, and address any concerns early.

Getting your affairs in order

After all, wealth transfer isn’t just about finances, it’s about preserving family harmony and ensuring your legacy is honoured according to your wishes. Taking the time to plan thoughtfully, communicate openly with loved ones, and seeking professional guidance can make all the difference.

We’re here to help you and your loved ones navigate the complexities of wealth transfer and estate planning. Whether you’re considering gifting during your lifetime, setting up a testamentary trust, or creating a lasting legacy, our financial advisers can guide you through the process with care and expertise.

Get in touch today to start the conversation.

Sources

i Bequest Report | JBWere

ii The numbers don’t lie | Solomon Hollet Lawyers

iii Wills | ALRC