Intergenerational estate planning

4 min read
28 June 2021

You’ve spent years, maybe even decades, building a successful family business. Perhaps you’re the current steward of an already well-established family business. Or it could be that you just want to make sure your wealth is passed down to your children or grandchildren with the least amount of drama.

But how will this happen and how does this look for you and your family?

The successful transition of any wealth, be it tied to a business or not, takes careful planning. However, a recent Family Business Survey showed that only 17 percent of small business owners have any type of succession plan in place. And this sits alongside the scary statistic that only one in two Australians have a valid will.

Whatever stage of life you’re in, intergenerational financial planning takes time. And what better time than the present to look at how you can successfully transition your wealth from one generation to the next.

What is intergenerational estate planning? 

Intergenerational estate planning is basically exactly what it sounds like – putting a plan in place for how wealth will be transferred to the next generation. 

In many countries, estate planning has a lot to do with death duties or taxes and how to minimise them. However, as Australia doesn’t currently impose an inheritance tax on those who receive money or property from a deceased estate, that’s one thing we thankfully don’t have to worry about.  

But that doesn’t mean there aren’t financial matters that need to be addressed when someone dies.

Why does intergenerational financial planning matter?

In recent years, there’s been a flurry of articles written about intergenerational wealth transfer.  


Because the generation of people born between 1946 and 1964, and who make up approximately 25 percent of the total Australian population, are aging. And within the next 20 years or so, they will start to pass down their wealth. They hold more than half of the nation’s wealth, so it’s estimated around $3.5 trillion will pass from one generation to the next.

As we already noted, with only half of Aussies having a valid will in place, things are likely to get very tricky, very quickly.

How does intergenerational wealth transfer happen? 

When a spouse or partner dies and leaves their estate to their partner, this is wealth transfer. However, intergenerational wealth transfer is when assets are passed from one generation to the next, such as mother to son, grandfather to grandson or aunt to niece. 

Some common ways wealth is transferred include via:

  • Wills
  • Estate planning
  • Superannuation
  • Investment bonds
  • Property
  • Life insurance
  • Shares
  • Trust funds

But the transfer of wealth isn’t always straightforward and while there’s many things that can go wrong, here’s a few of the most common:

Not having a will

A legal, valid will is the standard way to transfer wealth and ensure your final wishes are carried out. But as we’ve already stated, with an estimated 52%, or 9.9 million Australian adults without a will, it’s easy to see how things can go wrong

We don't talk about money 

Many people find it difficult to discuss money matters. Baby Boomers in particular, who may have grown up with tales of deprivation and hardship from the Great Depression or world wars. They worked hard and profited from those thriving post-war years, accumulating previously unimaginable wealth. However, they retain a reluctance to talk about money,  sometimes even to professional financial planners.

Oh we did that years ago

Estate planning should be an ongoing concern, something to be reviewed every few years. Not just a manilla folder gathering dust in the bottom desk drawer. In our recent blog about common estate planning mistakes, we noted that the old saying about ‘the only certainties in life, are death and taxes’ should be corrected to include change. Because families are constantly changing. 

People get into and out of relationships. People get married and divorced. Babies are born. People die. Real estate is bought, sold and revalued. Superannuation rolls over. People retire. Grandchildren are given a few dollars (that their parent’s know nothing about) when they move out of home for the first time. 

And on and on it goes.

Speaking of death and taxes

Just because we don’t currently have an inheritance tax, doesn’t mean you won’t have to pay taxes. If you inherit a property from a deceased estate and decide to sell, you may be liable for Capital Gains Tax (CGT).

And the Australian Taxation Office (ATO) reminds us that any income acquired as part of an estate will be assessed as normal income. This means you might have to pay more tax in the financial year you received your inheritance.

Who will take over your small business? 

If you’re planning to hand the family business to the next generation, you need to have a succession plan in place as part of your estate planning. A succession plan is the strategy for passing the ownership of a company or business to a family member. It paves the way for a smooth transition of power, assets and responsibilities in the exact manner you want it to happen.

A lack of proper intergenerational financial planning has the potential to make or break a small business and can rip families apart. The effects can be felt for generations to come. In fact, there’s an old Chinese proverb that says, 'Wealth never survives three generations’

So why leave anything to chance?

It’s important to speak to dedicated estate planning professionals with any questions you have about intergenerational estate planning.
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