Transfers of wealth from one generation to the next are a normal part of life. However, the next 20 to 30 years will witness the largest intergenerational wealth handover in history.
According to the Productivity Commission’s 2021 report, about $3.5 trillion in assets will be transferred in Australia by 2050. The bulk of this will come from the Baby Boomer generation (those born between the end of World War II and 1964) passing on family homes, investment properties, superannuation balances, direct shares, and other assets to their heirs.
As wealth levels rise, inheritances are poised to become a crucial source of income and assets for younger generations.
Great Expectations…
Around one in two Australians have either received or expect to receive an inheritance. This aligns with Australian government research indicating that many retirees are not spending all their superannuation before passing away.
The 2023 Intergenerational Report found that retirees often draw down their superannuation at the minimum rate, meaning many leave behind a significant portion of their savings. For instance, a single retiree withdrawing at minimum rates could still have a quarter of their retirement assets at death.
Projections from Treasury, cited in the 2020 Retirement Income Review, estimate that superannuation death benefits could grow from $17 billion in 2019 to nearly $130 billion by 2059 if current withdrawal patterns continue.
A Touchy Subject
Despite the stakes, inheritance planning remains a delicate topic that many families avoid. Discussions about death and wealth distribution are often uncomfortable, especially when multiple heirs are involved.
However, open conversations can prevent confusion and conflict later. Key steps include creating a valid will and documenting how you want your assets managed and divided.
Given that residential real estate and superannuation together account for over three-quarters of household wealth, ensuring proper documentation is vital. For superannuation, completing a binding death benefit nomination with your fund ensures your wishes are honored.
Seek Professional Advice
Inheritance planning is not just about asset distribution—it’s also about understanding potential tax consequences. For example:
Superannuation passed to a surviving spouse or dependent children is generally tax-free.
Adult children may face tax liabilities depending on the makeup of your super contributions.
Inherited shares are not subject to capital gains tax at transfer but may incur tax if sold later.
Unused capital losses cannot be transferred to beneficiaries.
Recent CoreData research shows that more than half of inheritors do not have an ongoing relationship with a financial adviser, highlighting a major gap—and opportunity.
Connecting with professional advice can help families navigate complex issues, preserve wealth across generations, and build lasting financial legacies.
Rick Maggi, Financial Advisor Perth, Westmount Financial