Intergenerational Wealth Transfer

We spend a lifetime generating wealth and assets but not many of us ensure that it will be passed to the next generation – our children, grandchildren, nieces, nephews, and so on.

Statistics[i] tell us that the largest shift in generational wealth is about to take place. The numbers can’t be ignored: –

  • Baby boomers comprise 25% of the Australian population and they currently own 55% of Australia’s private wealth
  • By 2020, there will be more 65-year olds in Australia than 1-year olds
  • Around $3.5 trillion will be subject to intergenerational wealth transfer in the next 20 years
  • 70% of intergenerational wealth transfers fail because of a lack of clear succession planning
  • By 2043, Gen X will require a saving balance between $2.09 and $3.98 million for a comfortable self-funded retirement
  • Around 94% of the Australian population won’t be able to fund their retirement
  • 87% of Australian businesses are family owned
  • Gen X and Gen Y face a future of high personal debt, expensive lifestyles and lack of affordability in the housing market. Superannuation simply won’t be enough to service the desire for instant gratification they’ve come to be accustomed to. Many (perhaps subconsciously) rely on the wealth they will inherit when making future financial plans.

This only makes it more important to ensure your wealth is transferred properly.

The prominence of business wealth among Australians highlights the need for a clear business succession plan. How will the wealth and assets from your business be handled after you are gone? Do you have a business partner who is not related to you? Are your children going to benefit from the business you’ve spent your entire life building? The statistics make this unlikely. Family Business Australia (FBA) report that only 20% of Australian businesses have a succession plan in place.

Putting into place appropriate succession plans will ensure that your chosen beneficiaries receive your wealth and assets in the most efficient and tax effective way.

[i] Brimble, M., Hunt, K., Johnson, D. & MacDonald, K. Intergenerational Wealth Transfer: The Opportunity of Gen X & Y in Australia, Griffith University (2017).

Tiarn Pauletto

Associate, PC Legal

[email protected]