Giving with a warm hand instead of a cold one – When to discuss inheritances.
The largest transfer of intergenerational wealth among Australians is going to take place in the coming 2 decades. Unfortunately for some families, not discussing this early enough can have a negative outcome.
It is estimated that $3.5 trillion of assets will be transferred by parents and grandparents over the next two decades. Often this is left until a family member is facing a significant health event and the discussions are intertwined with the emotion of seeing family member in ill health.
While these discussions are often confronting due to the personal nature, in our experience the most efficient and effective transfers generally come about through having these discussions early, outlining objectives of the transferor and planning ahead.
IMPORTANT OUTCOMES
Discussions regarding inheritance and wealth transfers are becoming more complex. Issues arising from blended families, half siblings, strained family relationships and concern about future financial troubles can all be factors.
The most important reason for engaging in these discussions include:
1. Avoiding arguments between family members.
2. Avoiding confusion regarding the intended outcome by communicating what is intended to be achieved with the relevant parties.
3. Ensuring unintended tax consequences do not diminish the value of the transfer.
4. Ensuring the transfer is maximised for future generations from a financial planning perspective.
5. Protecting wealth from negative outcomes such as future potential bankruptcy or divorce.
6. Watching future generations prosper and benefit from the gift.
HOW TO APPROACH AN INHERITANCE DISCUSSION
There are some important steps to take before undertaking an inheritance discussion.
First and foremost, understanding your financial world is critical. What are the assets that will be transferred and what vehicles are they held in? As an example, superannuation has different rules and is not automatically included in your will or estate.
Once this is understood, having a clear understanding of which assets are involved, creating a plan and understanding your objectives is vital. More often than not this will involve having the right advisors present, whether it be your accountant, financial advisor and/or a specialist estate solicitor.
Finally, having one meeting with all of the family members involved, to ensure that your wishes are understood and any concerns can be discussed. It can assist to have an independent advisor at the meeting and to hold the meeting at their office. This way the advisor can handle the tougher parts of the discussion and remove the emotion.
HOW SALT CAN HELP
These matters are difficult to discuss, typically because they revolve around your own mortality. While this is a confronting thought, having a meeting with an accountant and financial planner from Salt can make this discussion easier and focused on achieving a great outcome, to ensure that future generations of your family can continue to enjoy what you have built.
Written by Matthew Feehan
