Early inheritance a growing trend despite cost-of-living pressures

The juggle of helping kids financially while affording your own retirement is getting trickier, but seniors still plan to give an early inheritance. Take our poll.

The trend of early inheritances is increasing despite high living costs. Picture: iStock

Seven out of 10 parents aged over 50 intend to leave their children an early inheritance, but many worry they do not have enough to make their gift worthwhile.

Seniors plan to hand over money early to see the benefits of their wealth while they are still alive, finance specialists say, and some are downsizing their homes to free up money for their struggling children.

Research commissioned by Australian Seniors has found cost-of-living pressures concern half of over-50s, creating a balancing act of giving children a financial boost while not running out of retirement money themselves.

The Inheritance & Retirement Report 2024, produced by research consultancy MyMavins, found three-quarters of parents worry that rising living costs will prevent them from leaving a “substantial” inheritance, and many are making personal financial sacrifices so they can give more.

MyMavins consulting partner Tai Rotem said factors driving the early inheritance trend included parents feeling a responsibility to provide security for their children, watching them struggle financially today, and wanting more control about how their wealth was distributed.

“Another important decision driver is the desire to give with ‘warm hands’,” Mr Rotem said.

“Parents want to be able to experience the joy of giving and take pride in seeing the impact their bequests are making,” he said.

Safewill chief executive officer Adam Lubofsky said there was a growing awareness of the financial pressures faced by younger generations and seniors were “prioritising active assistance over a traditional inheritance”.

He said 18 per cent of parents were considering selling their current homes and downsizing to free up funds for their children.

“This suggests that Australians want to provide support at a time when their family may need it most, while also reducing potential inheritance disputes down the line,” he said.

Other senior parents are sacrificing by saving more and spending less, and more than eight out of 10 are open to discussing inheritances, the research found.

“This suggests a growing comfort level with these conversations compared to previous generations who may have viewed inheritance discussions as taboo or uncomfortable,” Mr Lubofsky said.

“This shift could be driven by a variety of factors, including a growing desire for transparency and proactive financial planning, as well as evolving societal norms.

“As families face increasing financial pressures, the need for clarity around inheritance becomes more crucial, prompting older Australians to address these matters with their loved ones.”

Greenstone Financial Services head of research Therese Waters said seniors’ main concerns about retirement were health costs and managing inflation.

Just 45 per cent of retirees currently believed they had enough money to last the rest of their retirement, Ms Waters said.

More than 40 per cent of seniors who were still working felt they had not saved enough, she said, but a large majority still wanted to help their children financially.

“Many parents today feel a strong responsibility to provide financial security for their children and grandchildren, especially given the rising cost of living, interest rates, and property and education expenses,” Ms Waters said.

“This has led to an increasing trend in early inheritance, allowing parents not only to support immediate needs – like helping children enter the property market or funding education – but also to experience the impact of their bequests first-hand.”

Mr Rotem from MyMavins said about three quarters of working seniors had concerns about adjusting to life after retirement, with cost issues dominating.

“Only three in 10 believe they already have enough,” he said.