Australia’s Intergenerational Wealth Transfer: What to Do When You Receive an Inheritance
Over the coming decades, Australia will experience one of the largest intergenerational wealth transfers in history. With an estimated $3.5 trillion set to change hands by 2050, many Australians will find themselves in a position to inherit wealth from their parents or grandparents. While receiving an inheritance can provide financial security, it also comes with important decisions and responsibilities.
At Thriving Wealth, we understand that navigating an inheritance is both a financial and emotional experience. Whether it’s property, cash, shares, or a family business, managing an inheritance wisely can significantly impact your financial future. Here’s what you need to know about the generational wealth transfer in Australia and the key steps to take when you receive an inheritance.
The Intergenerational Wealth Transfer in Australia
As Baby Boomers retire and pass on their wealth, younger generations will inherit assets that have been built up over decades. This transfer is being driven by factors such as rising property values, superannuation balances, and investment portfolios.
However, without proper planning, this wealth transfer can lead to financial mismanagement, unexpected tax liabilities, or even family disputes. That’s why both those giving and receiving inheritances should have a solid strategy in place to ensure wealth is preserved and used effectively.
In addition, financial literacy plays a crucial role in making the most of an inheritance. Studies show that wealth can often be lost within a generation due to poor financial decision-making. Working with experts and educating yourself on financial management can make a significant difference in preserving and growing inherited wealth.
Key Steps to Take When You Receive an Inheritance
If you’ve received or are expecting an inheritance, here are some essential steps to take:
1. Take Your Time Before Making Decisions
It’s natural to feel an emotional attachment to an inheritance, especially when it comes from a loved one. Avoid making impulsive financial decisions, and take the time to process the situation before committing to major purchases or investments.
Consider speaking with trusted professionals or family members to gain clarity on your next steps. A well-thought-out approach will help you make sound financial choices rather than emotional ones.
2. Understand the Assets You’ve Inherited
An inheritance can include different types of assets, each requiring different management strategies:
Cash or bank deposits – Liquid funds that can be used or invested immediately.
Real estate – Property may require decisions around selling, renting, or keeping it within the family. Consider the costs associated with maintenance, taxes, and potential capital gains.
Superannuation benefits – Depending on the circumstances, a superannuation inheritance may have tax implications and may need to be accessed strategically.
Investments (shares, managed funds, bonds) – These may need to be reviewed in line with your financial goals, market conditions, and diversification strategies.
Businesses or trusts – If you inherit a business or control of a trust, you may need legal and financial guidance to ensure its continued success.
3. Speak to a Financial Adviser
A financial adviser can help you develop a strategy to maximise your inheritance and ensure it aligns with your long-term financial goals. They can guide you through:
Investment options to grow your inheritance
Tax-efficient ways to manage inherited assets
Debt reduction strategies
Estate planning to ensure your inheritance benefits future generations
4. Consider Tax Implications
While there is no inheritance tax in Australia, certain taxes may apply depending on the assets received:
Capital Gains Tax (CGT) – If you inherit property or investments and later sell them, CGT may apply based on the asset’s original purchase price.
Superannuation Tax – If a superannuation death benefit is paid to a non-dependent, it may be subject to tax at varying rates.
Understanding these tax implications can help you plan ahead and take advantage of strategies to minimise tax obligations.
5. Protect Your Inheritance
Ensuring your inheritance is passed down effectively requires careful estate planning. Having a well-drafted will and setting up appropriate estate structures can prevent disputes and ensure your wealth is preserved for future generations. Consider the use of testamentary trusts, which can provide tax benefits and asset protection for beneficiaries.
Additionally, clear estate planning can help reduce the risk of excessive taxation or mismanagement of assets. Seeking advice from financial and legal professionals will ensure your inheritance is distributed in a way that aligns with your legacy goals.
6. Address the Emotional and Psychological Aspects
Receiving an inheritance can bring mixed emotions—grief, guilt, or even pressure to use the funds a certain way. It’s essential to acknowledge these feelings and seek support if needed.
Consider speaking with the right experts and building a support network of financial professionals, family, and even a counsellor to help process the emotional side of managing an inheritance. Having a clear financial plan can ease the burden and provide confidence in your decision-making.
7. Understand Your Money Mindset and Behaviours
Your financial behaviours and mindset play a significant role in how you manage inherited wealth. Many people fall into the trap of lifestyle inflation—spending more simply because they have more. Others may feel guilt around using inherited money for their own benefit.
Working with a financial adviser who incorporates behavioural coaching can help you understand your money mindset, avoid self-sabotaging financial decisions, and create healthy habits that align with your long-term wealth-building goals.
Shifting your mindset from short-term gratification to long-term financial security is key to making the most of an inheritance.
Final Thoughts
The intergenerational wealth transfer in Australia presents both opportunities and challenges. Whether you’re receiving or passing on wealth, careful planning is key to ensuring financial security for generations to come.
At Thriving Wealth, we help Australians navigate inheritances with confidence, ensuring they make informed decisions that align with their financial goals. If you’ve received an inheritance and need guidance on the next steps, reach out to our team—we’re here to help you make the most of this opportunity.
About the Author
John Cachia is a seasoned financial adviser and dedicated parent of three boys. With a passion for financial literacy and wealth management, John has been in the industry since the young age of 14. His early start in finance has provided him with a wealth of experience and insight, which he now uses to guide families towards achieving their financial goals. As Australia's leading wealth adviser for young families, John is committed to helping parents become positive financial role models for their children, ensuring a secure and prosperous future for the next generation.
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