How both sides can be prepared for wealth transfer

A monumental financial shift is coming—will you be prepared for wealth transfer? Over the next two decades, an astounding $3.5 trillion is expected to be inherited, primarily in property and superannuation.

To best manage this situation, both beneficiaries and benefactors will need to employ strategic planning to be ready.

At First Financial, we provide financial advisory services to help you build wealth and realise your retirement goals. Our holistic approach considers generational dynamics. We understand the challenges faced by both parties in wealth transfer. Whether you’re leaving assets behind or anticipating an inheritance, we’re here to address your readiness concerns and guide you to preparedness.

Where is the wealth?

Where is the wealth?

Baby Boomers are poised to transfer $3.5 trillion to the next generation in the coming years, with their assets spanning cash, shares and more. However, the bulk of this wealth resides in property and superannuation.

Born between 1946 and 1964, the Baby Boomer generation came of age during a period of remarkable economic growth and social change in our nation. They witnessed the post-war boom, experienced the rise of consumer culture and benefited from increased access to education and employment opportunities.

Despite economic challenges such as recessions and geopolitical uncertainties, Baby Boomers have shown resilience, and their focus on home ownership and retirement savings has led to this substantial wealth accumulation.

Challenges for benefactors

Challenges for benefactors

At First Financial, we have plenty of conversations with both benefactors and beneficiaries. For those leaving financial assets behind, it’s often the case that they haven’t sorted out wills or started their estate planning.

In estate planning, one of the most crucial factors to consider is the tax implications that come into play as assets transfer to the next generation. Overlooking this aspect can seriously complicate their finances after you’re gone.

While Australia doesn’t impose inheritance taxes or taxes on estates, loved ones may still incur tax obligations. For instance, if you leave behind a significant investment portfolio, your beneficiaries may face capital gains tax when they sell those assets. Therefore, the way you structure your estate can significantly affect the tax burden they may face.

Challenges for beneficiaries

Challenges for beneficiaries

If you anticipate an inheritance from your parents or family, it’s important to know their assets, provided they’re open to discussing them. As mentioned, there could be substantial tax implications upon receiving them, but there are tax-effective strategies to mitigate this.

When a property is involved, whether it’s the family home, an investment property or a holiday home owned by either parent, significant decisions arise regarding whether to occupy, rent out or sell them. The optimal financial choice depends on various factors, so it’s essential to seek financial advice.

Additionally, adjusting to a sudden windfall and managing new financial responsibilities can be overwhelming. Beneficiaries must carefully assess their situation and develop a plan to secure their long-term financial well-being.

Estate planning and important conversations

Estate planning and important conversations

Both sides of wealth transfer require preparation before the inevitable transition occurs. No matter which side you’re on, initiating challenging conversations is imperative. If you’re a Baby Boomer, involve your children in discussions about your assets and ownership structure and give them the opportunity to adequately prepare.

Don’t postpone estate planning. While considering a future without you may be unsettling, being proactive is essential.

Estate planning involves maintaining an up-to-date will, selecting an executor and appointing an enduring power of attorney.

From navigating intricate trust structures to optimising investment management strategies, an experienced financial adviser offers tailored guidance to suit your individual circumstances, empowering you to make well-informed decisions. Ultimately, this approach enhances the security and prosperity of your beneficiaries and sets a solid foundation for future generations.

Talk to the financial planning experts

Talk to the financial planning experts

While there may be $3.5 trillion in assets to be passed onto the next generation soon, the overwhelming majority of benefactors and beneficiaries are vastly underprepared. Don’t let that be you.

Whether you’re planning your own legacy or anticipating an inheritance and feeling unsure about how to manage it, we’re here to help.

For professional financial advice, contact a member of our friendly team today.

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