Wealth Management

Creating an intergenerational wealth roadmap

Matthew Swieconek
3 December 2023
6 min read

Over the next 20 years, Australians are set to witness the largest intergenerational wealth transfer with Baby Boomers expected to leave behind $224 billion in inheritances to the next generation. Since many Baby Boomers will begin reaching retirement age within the next five years, now might be a good time to reflect on what your dream retirement looks like and how the great wealth transfer feeds into your financial planning.

What is intergenerational wealth?

When we talk about the intergenerational wealth transfer, we’re referring to the concept of moving wealth from one generation to the next and the process of transferring assets such as financial investments, real estate, businesses, and personal property. Wealth can be passed down in the form of an inheritance, gifts or through other means such as testamentary trusts.

Intergenerational wealth provides the receiving generation with financial stability, opportunities for education, and the ability to pursue personal goals and passions. For the giving generation, it offers the satisfaction of having passed on a legacy that supports your loved ones’ dreams.

What are the benefits and challenges of a generational wealth roadmap?

Why do I need an intergenerational wealth roadmap?

As you enter retirement, developing a roadmap for transferring generational wealth to your heirs is a good idea because of how sensitive and complex the process can be. This forms part of your estate plan, which provides you with the opportunity to hammer out any logistical, legal or family issues that may come into play.

You may even find that having a plan in place means your loved ones are better prepared to handle their part in the wealth transfer. Especially since lack of preparation, tax knowledge and financial education are some of the main factors that lead to a decrease in wealth between generations.

What are the benefits and challenges of a generational wealth roadmap?

While it’s beneficial to have a blueprint detailing how and when your assets are to be transferred to your beneficiaries, there could be some bumps in the road along the way. Before we explore how to create a roadmap, let’s look at some of the benefits and challenges you may face.

The benefits

An estate plan streamlines the process for you and your loved ones by:

  • Acting as a guideline for executing your wishes and values

  • Helping you avoid or resolve potential disputes among family members

  • Providing the opportunity to work out tax efficient ways to transfer wealth

  • Ensuring your beneficiaries are well equipped to manage and grow said wealth

The challenges

It’s estimated that 70% of families will lose their generational wealth by the second generation and 90% by the third. While creating a roadmap should help solve the challenges of intergenerational wealth transfer, some of the following factors can get in the way if not anticipated:

  • Taxes eating up your wealth. Unfortunately, few people understand the tax implications of transferring wealth, which could expose tax liabilities and surprises down the track.

  • Assumptions among family members. The importance of open and honest communication in effective wealth governance cannot be understated. Set expectations early.

  • Failure to educate the next generation on wealth preservation. This could leave beneficiaries without the necessary skills to execute your wishes and build on the wealth they receive.

  • Creating an estate plan and then never reviewing it. All financial plans need to be reviewed and adjusted over time due to shifting factors like changes in financial circumstances, evolving family dynamics and growing goals. With periodic reviews, your final estate plan should accurately reflect your wishes and needs.

Before you look at transferring wealth, it’s important to ensure that your retirement wishes are accounted for first. The golden rule in financial planning is to take care of your own financial needs before the needs of others.

How do I create an intergenerational wealth roadmap?

How do I create an intergenerational wealth roadmap?

A wealth transfer roadmap is a crucial part of estate planning. Here are a few tips to help you establish an appropriate transfer strategy.

  • Define your goals and objectives. This involves defining what a happy retirement means for you and then will likely evolve into who you want to benefit from your accumulated wealth – and when you want them to receive it. Not everyone wants to wait until after they die to pass on money or assets. With smart asset management, you may find that structuring your affairs in a certain way could minimise tax on your loved ones later.

  • Evaluate your current situation. After establishing your goals, the next step is to take stock of your assets, income and liabilities and allocate yourself enough resources to comfortably cover your retirement or any significant anticipated expenses such as aged care.

  • Identify suitable strategies. Choose strategies that align with your goals. Financial advisers can help iron out some of the complexities associated with distributing your assets.

  • Create or update your will. This is an official document providing guidelines for how your assets and liabilities are distributed after your death. Make sure it reflects your most up-to-date wishes.

  • Review your roadmap. Keep your roadmap current by regularly reviewing and adjusting it as needed. We recommend looking at it least once a year or anytime you experience a major life event like marriage, divorce, birth of a child or death of a spouse.

Key takeaway

The generational wealth transfer is more than just a financial shift; it’s a testament to the legacies families leave behind. Careful planning is recommended for all generations to preserve and grow their wealth, helping to safeguard values, family unity, and philanthropic efforts.

Working with Findex gives you access to estate planning professionals who can help you create an intergenerational wealth roadmap that aligns with your retirement goals. Our comprehensive wealth management services help you to reduce risks so you can build sustainable family wealth for generations.

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Author: Matthew Swieconek | Head of Investment Relations