A recent Productivity Commission report estimates that $3.5 trillion in assets will likely change hands in Australia by 2050.
One of the main problems with this wealth transfer is that most of us are just not ready for it. At TAG, we see some common issues:
A spouse dies and the other spouse has never dealt with money issues.- We see ‘wealth shock’ in children that receive an inheritance which can lead to financial mismanagement and wealth erosion.
- There is regret that the estate plan has not been discussed openly beforehand as this lack of preparation can cause difficulties carrying out executor duties which can also lead to conflict.
- NO will.
According to TAG partner, Michelle Griffiths, we can do a few things to help avoid these issues:
- Expose your children to investment decision making before they receive an inheritance. There are various ways you can do this. Here are two ideas:
1. One approach is to set up a family Self Managed Superannuation Fund (SMSF). This provides the next generation with a safe environment to learn to make their own financial decisions. There can be up to 6 members in a SMSF.
2. Another approach is gifting. Give some money to the children and guide them in how to make good investment choices. Through practise they will learn how to make sound financial decisions into the future. - If only one spouse is confident with money matters, it’s a great idea to reduce any complexity around your wealth. Getting an advisor to help can also assist greatly.
- Talk about your estate plans with everyone involved and make sure you are clear about what will happen to your wealth and inheritance.
- Don’t be one of the 50% that dies without a will as it ultimately causes problems and costs a lot more in fees to fix this up rather than investing in a good estate plan whilst you are alive.
- Expose your children to investment decision making before they receive an inheritance. There are various ways you can do this. Here are two ideas:
Any questions
If you would like to chat about how best to manage your inheritance and avoid wealth shock, feel free to get in touch with us on 03 9886 0800 or drop us an email. We’re here to help you make the most of your financial future.
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Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2023. Please do not reproduce without the expressed written consent of the author.