Essential Information on Intergenerational Wealth Transfer

Inheriting wealth is a life milestone that prompts many to seek financial advice.

Passing down money, other resources, and property can be complex and sometimes contentious. That may be one of the reasons many families find discussing death and inheritance painfully awkward. However, it is inevitable and needs to be a topic of conversation, especially in light of the increasingly sizeable intergenerational wealth transfer.

You may have heard mention of the phenomenon called The Great Wealth Transfer of the 21st Century. This is a 3.5 trillion dollar intergenerational transfer of wealth that is taking place and will continue to the projected year 2050. While a large portion of this is financial, other inheritance will include family homes, investment properties, superannuation money, direct shares, and a wide range of non-financial assets.

The staggering amount of the transfer will serve younger generations well, but it is something members of the Silent Generation and Baby Boomers must address.

Although taking charge of your finances is perfectly acceptable, many people have great peace of mind when they work with financial experts like M2 Corporate. Additionally, experience-based advice can help both generations understand the Great Wealth Transfer’s complexities.

Who are the Silent Generation and the Baby Boomers?

The Silent Generation was born between 1925-1945. They are senior citizens aged 77 through 97. The years 1946-1964 saw Baby Boomers enter the picture. This group comprises seniors and those nearing retirement, ages 58-76.

Who are the Generations to Receive Wealth?

The generations set to gain from the Great Wealth Transfer are Generation X (1965-1980), Millennials (1981- 1996) and Generation Z (1997-2012). There is a vast divergence in life experiences and world views among these three groups, making good preparation for wealth transfer imperative.

Likely Impact of Intergenerational Wealth Transfer

Whether the amount of wealth received is substantial or modest, the money usually brings life-changing consequences to recipients. Often the financial situations of the recipients, as well as the relationships they have with other beneficiaries, dictate if the experience is positive or negative.

Interestingly, researchers discovered that wealth transfer would significantly impact recipients with fewer financial resources than those who have already gathered wealth. Conversely, it may deepen the divide between people depending on whether they had richer or poorer parents.

How Do I Plan for an Intergenerational Transfer of Wealth?

While every family will have slightly different circumstances, there are several steps to consider when planning your intergenerational wealth transfer that can benefit most families.

Start Your Planning Early

Few, if any, people want to spend time thinking about their mortality. It is much more comfortable to anticipate living to old age and quietly slipping away, but life takes many unexpected turns that everyone must consider.

It is necessary to avoid the temptation to brush the topic aside. Leaving the planning until you are very near to retirement or when you suddenly discover you have a severe illness adds an extra layer of stress to an already difficult situation. Early planning affords you the time to discuss all matters affecting your wealth transfer, including how to manage sensitive family circumstances reasonably.

Offering a clear and logical plan for the future often helps to mitigate cries of unfairness, especially amongst beneficiaries who are divergent in age or mental capacity.

Gather ALL Who Will Inherit Wealth to Discuss the Future

Because inheritance is emotionally charged, open conversation among all involved is vital. Often, advanced knowledge of what will happen can prevent contentious behaviour after your passing. A meeting such as this is the time to outline any responsibilities or conditions attached to the wealth transfer.

Taxes and other legal matters usually accompany intergenerational wealth transfers, so bringing your financial advisor into the meeting is wise. A professional can explain the finer details so everyone is aware of what will happen and what to expect once they receive their inheritance.

Provide Financial Education

Offering your children or grandchildren explanations regarding finance at an early age is highly beneficial. However, working with heirs of any age will help them understand how wealth transfer works. Explaining the finer points of wills and trusts assists your beneficiaries with the process. Additionally, it helps you by giving you peace of mind that the wealth you worked so hard to accumulate will be in good hands.

Inheriting wealth is something your heirs should prepare for to make the most of the gift you provided. You may want to make several suggestions while you are in the early stages of planning. These include:

    • Seek sound financial advice regarding ways to make sure the inheritance is safe
    • Make extra payments to the superannuation
    • Buying or managing property
    • Investing in various shares
    • Begin to establish an inheritance for the next generation of the family

Planning for your intergenerational transfer of wealth does not need to be frightful or confusing. Your best course of action is to work with experienced financial advisors to help keep you on track. For more information, feel free to contact M2 Corporate. Our team of expert advisors has a wealth of experience that can help you plan for several different scenarios.

**Please Note**

The material presented is for informational use only. It should not be used as a replacement for meeting with a financial professional and should not be considered binding financial advice.

Mace Turco

Mace Turco

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Mace has always had a passion for business, and he loves working with clients who are driven and have ambitious business goals. His qualifications include an AIPA from the Institute of Public Accountants and a Bachelor of Commerce from The University of Western Australia for Corporate Finance and Financial Accounting. In 2020 Mace was awarded the 30under30 Award in the Business Advisory Category, a National Award hosted by Accountants Daily.