There is a major change in estate planning occurring in Australia, with next of kin receiving inheritance based on “purpose, opportunities and security” from older relatives who aren’t waiting until they pass away to transfer the money across, a wealth manager has advised.
Kirsten Lynn, a private wealth adviser at Stanford Brown, has reflected on the changes to intergenerational wealth transfer which is now seeing individuals helped when they need it most.
“People are thinking more about the transfer of wealth during their lifetime and increasingly thinking about the benefit, needs and timing for individuals,” Ms Lynn said.
What is causing this change?
A broader demographic change and an ageing population have been highlighted as some of the reasons why individuals are passing on wealth.
“If your parents are living into their 90s, that means you’re probably not inheriting until you’re in your 60s,” Ms Lynn said.
In your 60s, you’re probably passed some of the major times where you want to inherit, or the major costs of raising children and paying down mortgages, she continued.
Another major change is family unit structures, with couples separating and remarrying, forming a new family unit.
“This means there is a broader group that needs to be factored in,” Ms Lynn said.
Finally, the sheer wealth that is going to be transferred over the next two decades is a major reason for intergenerational inheritance changes.
“Some of the research is suggesting it is $3.5 trillion, and broadly, baby boomers make up 25 per cent of the population but make up 50 per cent of the wealth,” the wealth adviser continued.
Holistic approach
Instead of focusing on passing wealth on in a traditional mirror will, the wealth managers are seeing a growing trend where inheritance is based on needs.
The wealth manager outlined that people passing on their wealth need to consider whether to pass on the wealth to the children or grandchildren, should they pass it on through paying for education, should they support a charity and how much the family does actually need.
Now, people are thinking more about the relationships involved and making sure to protect individuals’ feelings before passing on wealth.
“There’s more thought being given about the preservation of relationships and what they want and coming up with a plan more effective for everyone,” Ms Lynn said.
The wealth manager also highlighted how wills are being created with families involved in the conversation due to the threats of court challenges.
nestegg recently considered the importance of family members being made aware of the contents of an individual’s will.
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