We often bemoan about the pains and pressures brought on by rising prices, but rarely do we wonder what these will mean for those nearest and dearest to us after we’re gone. That’s the question more and more Baby Boomer Australians are asking themselves as they begin the process of inheritance planning.

And many are finding that as the value of their property, superannuation and personal investments increase, so too do the inheritances expected to be enjoyed by the next generation of Australians.

The Great Australian Wealth Transfer has forecast to see up to $5.4 trillion to be passed on from Baby Boomers in the next 25 years, leading many Australians to consider if it is all to be given away at the end of the day, then why not begin the gifting while you’re still here to see your loved ones enjoy it?

Living inheritances are increasingly becoming a top contender for ageing Australians weighing up their options when it comes to inheritance planning. Rather than sitting on a sum that will eventually be spent, I’m seeing more clients wanting to make deliberate decisions to gift assets during their lifetime as opposed to the traditional posthumous inheritance.

If the rewards to be reaped by your loved ones on the receiving end of the transaction look like finally breaking into the property market, funding education or furthering business pursuits, it’s only natural that you’d like to see these milestones for yourself.

At least, for the seven in 10 Australians over 50 years old who intend on passing on an early inheritance to help support their successors, these seem to be the primary motivators.

Deciding whether a living inheritance might be the right fit for you and your family requires a careful and measured approach.

For those more pragmatic among us, another considerable motivator for living inheritance – specifically through transfer of superannuation fund balances – is the possibility of circumventing excessive death benefit tax.

Currently, a death benefit tax of 17.5 per cent including Medicare levy to the taxable component of one’s superannuation balance applies if superannuation benefits are paid to non-financial dependents – typically adult children.

In line with the hot topic issue of the proposed Division 296 tax changes which, if legislated, would apply to superannuation balances over $3 million, I expect to see an increase in the number of retirees reconsidering how they deploy their superannuation assets during their lifetime.

This approach is already accelerating in popularity among older Australians, illustrated by a recent client of mine in his 90s, who decided to withdraw assets from his pension fund to gift to his children in an attempt to help minimise a potential death benefits tax when he passes away.

Possibly the most contentious caveat of living inheritances is the potential for an inequitable division between heirs. If not considered carefully, this can lead to family disputes and contest of the will when the giver passes away.

Much like any method of financial planning, deciding whether a living inheritance might be the right fit for you and your family requires a careful and measured approach. To help decide if living inheritance is your best option, here are some considerations I’d encourage people to explore with their financial planners.

How can you help ensure protection when gifting?

Any outright gift where the giver simply makes a cash or property transfer may provide immediate benefit but opens the possibility to losing control after the transfer. I remind clients constantly to only give what you can truly afford – once it’s gifted, it’s almost impossible to take back.

If a substantial sum is involved, it is always wise to formalise the process with the proper documentation, such as a loan agreement to keep funds within the family. This also works to protect both parties from relationship breakdowns, creditors or professional indemnity issues.

Another approach may be to use a discretionary family trust, which enables flexible distributions of funds and asset protection. Alternatively, a testamentary trust is activated on death by the will and provides tax efficiency and control.

If you decide that transferring from your superannuation fund is the best choice for you, consider whether you have met a condition of release.

If you are in pension phase, then funds can be drawn tax-free during your lifetime – that is, of course, bearing in mind that once funds come out of your pension account, you cannot re-contribute back to your superannuation unless you meet certain conditional criteria.

For retirees ruminating about a legacy that extends beyond their immediate heirs, philanthropy strategies are also rising in popularity when succession planning, enabling people to create a more lasting and purposeful legacy.

With all these options at hand, a consideration to keep in mind for any approach to a living inheritance is capital gains tax, which may be triggered by the change in ownership of any asset upon transfer.

If the saying “the first generation makes it, the second generation spends it, and the third generation blows it” is any true, I’d offer one final piece of advice– think beyond just the beneficiaries who already exist.

When a gifting strategy is developed with multiple generations in mind, the family wealth is likely to last longer, enabling the family to adopt a meaningful approach to deployment of their wealth, working to help close the wealth gap for generations to come.

Grace Bacon is the director of RSM Financial Services Australia (AFSL 238 282), advising clients on wealth management, retirement planning and succession planning.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their personal circumstances before making any financial decisions.

Expert tips on how to save, invest and make the most of your money delivered to your inbox every Sunday. Sign up for our Real Money newsletter.