Not so happy families: Why WA’s looming intergenerational wealth transfer could be costly

There are fears the impending intergenerational wealth transfer led by cashed-up Baby Boomers could be costly in resources-rich Western Australia, with more than half bracing for a family row over their inheritance.

Australia is on the cusp of the largest transfer of wealth in the country’s history, with around $5 trillion projected to be passed down over the next two decades — almost half of which is held by Boomers and tied up in property, private businesses, family trusts and superannuation.

A new report released by Perth-based law firm Solomon Hollett Lawyers found 60 per cent of West Australians believed there would be a dispute over a family estate.Credit: WAtoday

A new report released by Perth-based law firm Solomon Hollett Lawyers found 42 per cent of West Australians either did not have a will in place or were unsure whether they did, while 14 per cent penned their wishes more than a decade ago.

The Inheritance State of Play in WA report, which collated the survey responses of almost 1000 people, concluded 60 per cent of those surveyed were at a high-risk of having poor to catastrophic inheritance outcomes, something the firm believed should serve as a wake-up call.

The same proportion of respondents expected to wind up in a dispute over inheritance that could end in a court row due to fractured familial relationships, property or sentimental items.

The report — the first of its kind produced in WA — found those anticipating a row were on both ends of the spectrum, from higher income earners with lucrative assets to lower income earners.

The stakes were particularly high for the state’s farming families, the report found, many of whom have complex business models.

Solomon Hollett Lawyers director Morgan Solomon said estate disputes were growing, both in the number of cases and the quantum of the claims – running from tens of thousands of dollars up to hundreds of millions.

Solomon said the growth in the number of disputes had been underpinned by the increasing value of the estates being left behind and changing family dynamics.

Many West Australians who did not believe there would be a dispute thought any concerns would be allayed by the strength of their relationship with their siblings.

But the report pointed out that while the lion’s share of will challenges were launched by immediate family, one in five were spearheaded by partners or ex-partners.

National data shows almost three-quarters succeed, resulting in a change of distribution from what was outlined in the original will.

Almost one-quarter of those surveyed believed their heirs would not be able to cover outstanding debts or get onto the property ladder without an inheritance.

“Estate disputes and litigation are growing, both in the number of cases and size of the prize”

Solomon Hollett Lawyers director Morgan Solomon

That is not lost on those carving up their estates, with more than half wanting the assets they left behind used to make life easier for their loved ones, to bankroll property purchases or clear debts.

About 29 per cent of respondents were adamant there would be a dispute over assets within their family, while 20 per cent feared the inheritance may be squandered or lost through a future divorce.

A total of 17 per cent believed there would not be enough to go around and the same proportion of respondents believed it may be left to the wrong people.

The average inheritance in Australia is about $125,000 and the average recipient is 50 years old, according to the Productivity Commission.

Other participants expressed concern about the risk of executors “behaving badly” or that the windfall changing hands over the coming years may spark the reintroduction of taxes on inheritance.

The “bank of mum and dad” now playing a greater role in helping younger generations get on the property ladder has also shifted expectations among beneficiaries, many of whom expect the playing field to be levelled by their inheritance.

About 14 per cent of those surveyed expressed a desire to help those outside their immediate family, from charities to other causes including education, animal welfare or in memory of loved ones.

The report also highlighted the issues associated with many first-time wills being written later in life, which the firm pointed out could leave the door open to issues around diminished mental capacity or coercion.

Solomon said the figures demonstrated the state’s very low level of public “succession literacy” and was shocked by the proportion of respondents bracing for an inheritance row.

He said the company hoped the report would provide the ammunition to improve succession literacy, with the data reinforcing the need for greater education in the space and the importance of proper estate planning.

“Our research shows 60 per cent of those surveyed said they were anticipating an inheritance dispute in their family. We were shocked by this and thought the number might be closer to 25 per cent,” he said.

“There is significant wealth here in WA — our state’s population of over 3 million is 11 per cent of the national population, yet responsible for around 17 per cent of the national economy.

“Wealth is high, as is wealth inequity – seen perhaps most acutely in homeownership – with around 1 million dwellings here, a third of which are rented.

“With rents skyrocketing, barriers into the housing market are at all-time highs. Just one example of why inheritance transition, protection and leverage have never been more important.

“We have seen time and again the devastating fallout from poor estate planning that can echo for generations, and with the increased sizes of estates coupled with the changing family dynamics of modern society the disputes have skyrocketed.”

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