Intergenerational wealth: Why it matters

Australia is about to experience a major shift in wealth. According to a report by JB Were, by 2034, an estimated $4.9 trillion will be passed down from baby boomers and their parents to the younger generations. Inheritances are expected to have reached $150 billion in 2024, more than double the amount in 2002.

With over 20% of Australians projected to be aged 65 or older by 2030, planning for this intergenerational wealth transfer has never been more important.

Without proper preparation, passing on wealth can lead to unnecessary taxes, legal issues, or even family conflict. Whether you’re just starting to think about it, or already making plans, understanding why it matters and where to start is key.

What is intergenerational wealth transfer?

At its core, intergenerational wealth transfer is the process of passing assets—such as property, investments, superannuation, and businesses—from one generation to the next. Often, this happens through inheritances when a family member passes away, but it can also occur during a person’s lifetime through gifting or transferring ownership of assets.

Why is it important?

Wealth transfer isn’t just about passing down money—it’s about preserving what a family has built. It means protecting assets and ensuring those who inherit are ready to manage the responsibility.

For older generations, it’s about peace of mind—knowing their wealth will continue to support loved ones. For younger generations, it provides a solid foundation to build their financial future.

Today’s families are more complex, with blended structures and diverse needs adding challenges to estate planning. Without a clear plan, disputes or mismanagement can arise, making preparation essential.

How to approach wealth transfer: Key considerations

Wealth transfer can feel overwhelming, but with the right planning, it doesn’t have to be.

One of the biggest factors to consider is tax. Without proper preparation, beneficiaries may face unexpected tax bills, especially on assets like investment properties and shares.

Here are a few important steps to keep in mind:

1. Start early

The earlier you begin thinking about wealth transfer, the better. Starting early gives you time to explore your options, address potential challenges, and create a plan that works for your family’s unique situation. It also allows you to adjust the plan as circumstances change.

2. Create an estate plan

A solid estate plan is the foundation of effective wealth transfer. This includes having a Will that clearly outlines how assets should be distributed, as well as setting up powers of attorney and guardianship arrangements to handle decisions in case of incapacity.

3. Consider a trust

Trusts can help reduce taxes, particularly on capital gains and income. Assets held within a trust are generally shielded from risks such as creditors, legal disputes, or misuse by beneficiaries, as they do not have ownership until a distribution is made.

Additionally, a family trust is a separate legal entity and does not form part of an estate, minimising the risks and complexities associated with Will disputes.

4. Look into investment bonds

Investment bonds offer another tax-friendly way to pass on wealth. If held for over 10 years, withdrawals—including earnings—are tax-free, making them an efficient option for long-term financial planning.

Like superannuation, investors can nominate a beneficiary, making it easier to pass on funds. This streamlines the estate process and ensures beneficiaries receive their inheritance tax-free.

5. How SMSFs Help

Self-Managed Superannuation Funds (SMSFs) offer greater flexibility in estate planning compared to public super funds. They allow for tax-efficient wealth transfer by enabling pension payments to dependents instead of lump sums, keeping investments intact.

SMSFs also facilitate in-specie asset transfers, allowing property or shares to be passed on without liquidation, preserving investments across generations.

6. Talk to your family

Conversations about inheritance and estate planning aren’t always easy, but they’re important. Being open about your plans builds trust and helps prevent confusion or disputes later. It also gives your family a chance to understand their roles, whether it’s managing investments, running a family business, or making financial decisions.

Helping younger generations develop good financial habits—like budgeting, investing, and planning for the future—prepares them to handle their inheritance wisely.

The sooner you start these conversations and put a plan in place, the smoother the process will be.

The bigger picture

Wealth transfer isn’t a one-time decision—it’s something that needs ongoing attention and flexibility.

There’s no one-size-fits-all approach, as every family’s situation is different. What works for one may not work for another, but starting early, and having open conversations can make the process much smoother.

Life changes, and so do financial rules, so it’s important to review and adjust your estate plan regularly. Seeking expert advice can help ensure your strategy remains relevant and effective.

Disclaimer: This article is prepared by Ankita Rai for educational purposes only. While all reasonable care has been taken by the author in the preparation of this information, the author and InvestmentMarkets (Aust) Pty. Ltd. as publisher take no responsibility for any actions taken based on information contained herein or for any errors or omissions within it. Interested parties should seek independent professional advice prior to acting on any information presented. Please note past performance is not a reliable indicator of future performance.