Australia is entering the biggest intergenerational wealth transfer in history, with a staggering $5.4 trillion expected to be transferred to younger generations over the coming decades. It’s sparked a warning for Aussies to plan ahead and communicate now, so loved ones aren’t left disappointed down the track.
Nearly two in three Aussies plan to pass on money or assets when they die, new research by Finder has revealed. The majority plan to leave the bulk to their children (63 per cent), while 22 per cent will prioritise their partner.
Another 5 per cent plan to leave their estate to extended family, 4 per cent to their siblings, and 3 per cent to charity.
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Finder personal finance expert Sarah Megginson said wealth transfers were large and growing, as household wealth balloons off the back of rising property prices and sharemarkets.
“For some, it could be life-changing money,” Megginson said.
“Australia is on the cusp of the largest intergenerational wealth transfer we’ve ever seen. The decisions families make now will shape financial outcomes for decades.”
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It comes amid renewed calls for Australia to introduce an inheritance tax as a means of improving intergenerational inequality.
Australia has had inheritance taxes in the past, which were also known as death duties. Federal and state levies were imposed on deceased estates, but these were abolished in the late 1970s as they were seen as unpopular with voters.
Australia is now one of the few OECD countries that don’t have inheritance or estate taxes, with Anglicare noting that the taxes accounted for about 1.5 per cent of GDP in France, 0.9 per cent in Belgium and 0.7 per cent in Germany in 2020.
An inheritance can be “life-changing”, but Megginson warned it can also be fleeting if not managed wisely.
Despite millions planning to leave an inheritance, the Australian Law Reform Commission has found that around half of Aussie adults don’t have a legally valid will.
Superannuation, which is the biggest asset for many people outside their family home, is also not automatically included in your will.
You’ll need to make a binding death benefit nomination, otherwise the trustee of your super fund decides where your super goes and this could be different to what your will says.