The wealthiest generation we have seen in history are the
Baby Boomers (1946-1964) – approximately 25% of Australians. They are now
ageing and preparing to pass down a record-breaking amount of assets to their
children.
Or are they?
Today's Boomers are
currently living in a “You Only Live Once” mindset, driven to try new
experiences and stay active in their golden years. Not only are they pursuing expensive
retirement activities, and spending more on consumer goods than today’s younger
generations, but they are also taking risks with investments.
Their years of children’s school fees, down payments on homes
and cars, caring for grandchildren financially and so on, are taking a back
pocket to their own future enjoying their money while they still can. Boomers
are still spending, taking care of themselves for a change, and not ready to
hand over their hard earned and accumulated wealth.
To compound this dwindling wealth transfer, our Boomers just
aren’t even thinking about how to deal with their money when they’re gone. And
if they have had that back-of-the-mind thought, they’re certainly not talking
about it.
The discussion
between parents and their children about wealth transfer is still a taboo subject.
Why could that be? Many parents are hesitant to have that
conversation in fear of realising their mortality, but also in fear of raising
their children’s financial expectations.
Parents also tend not to discuss their wealth transference ahead
of time because they don’t want to deal with the ramifications of a child that
feels hard done by. They may not have to deal with it when they’re gone, but
someone does, and it can break future generations apart. So best to deal with
it now.
“Money is the root of
all evil”, a biblical passage based on a letter from Apostle Paul, was never
truer when it comes to inheritance. Some stories you hear of family fights over
“unfair” distribution of inheritances would make their parents turn in their
grave. Of course, they would never think that their children would fight over
money. But it does create family problems. Often.
Planning what happens to this wealth transfer is a very important subject that does need
addressing, whether it is initiated by the parent, or by the child. There is
only one way to plan this Estate Planning, and that is to establish a
plan.
This Boomer inter-generational wealth transfer is fast-approaching, and the discussion
needs to be initiated now. This discussion also needs to include every concerned
party – those that are doing the leaving, and those that are doing the
receiving. Every concerned party needs to understand the process and how it may
affect them, and the positive impact it will have. The best place to start, is to
form a relationship with a financial adviser. They are dealing with Estate
Planning most days of the year.
Our Boomers, and their children, need to understand how
financial advice can help avoid tax burdens, manage existing investments,
develop retirement plans, and avoid family infighting down the track.
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Karen Vickers is a Sydney based Financial Adviser, at Arc
Wealth, with years of experience helping individuals, couples and families
manage their finances and transference of wealth. www.ArcWealth.com.au
