The simple ways to plan for Australia’s ‘staggering’ wealth transfer

An estimated $3.5 trillion in intergenerational wealth will be transferred over the next 20 years in Australia, according to the Productivity Commission.

It’s a staggering figure that underscores the importance of managing where those assets will ultimately end up.

“Around 70 per cent of the Australian population doesn’t have a legally binding will,” says Peter Hogg, general manager – advice and guidance at Aware Super.

Aware Super’s Peter Hogg

“There’s a level of uncertainty about how those assets will be transferred to the next generation, and we think it’s really important that people consider that.”

Drafting a binding will is an obvious place to start for those wanting to create a successful plan to carry their wealth through to the next generation. But it’s not the only consideration.

“Our lives can be complex, so estate planning is now more than simply writing a will,” says Julia Tonkin, a partner at law firm Maddocks and an accredited specialist in wills and estates law.

“The old saying, ‘If you fail to plan, you are planning to fail’ comes to mind,” she says.

“Estate planning is important because, when done well, it can provide support, opportunity, protection when needed, and certainty for those who are most important to us.“

Enduring powers of attorney for assistance with loss of capacity or managing affairs as we age, considering the succession of control of assets in discretionary family trusts and advanced medical and healthcare directives all play a role.

Identifying a binding beneficiary for superannuation is also important.

Many Australians are surprised to learn that superannuation is not automatically part of their estate. That’s because, legally, super is held in a trust that’s separate from personal assets.

About 70 per cent of Australians don’t have a legally binding will.Credit: Shutterstock

“Interestingly, about two-thirds of our members haven’t told us where they want their super to go,” Hogg says.

“We’re working hard to encourage them to make those decisions. It can be really quite straightforward – the best thing to do is contact your fund and nominate your beneficiary once you know where you want it to go.”

Common issues in estate planning include people not understanding how jointly held or trust-held assets differ from their other assets, managing the often-competing claims to assets in blended families, and the rise of both overseas assets and digital assets such as cryptocurrencies.

With so many considerations, estate planning can seem like a daunting task. But there are ways to start simply.

Aware’s Peter Hogg recommends starting with a basic conversation with your family about your goals and wishes for your assets.

“That just gets things moving, and from there you can create a list of your assets and liabilities – everything from the house you own, investments, personal possessions of value – and mapping where you want those assets to go,” he says.

He suggests Australians think about estate planning as a natural extension of proper retirement planning.

“There’s a natural connection,” he says. “We know that when our members get advice, it has an impact not just on their overall position, but also on their confidence in retirement as well.”

Given how complex the process can be, Tonkin says it pays to get professional advice.

“Many a mistake has been made in a homemade will which, paradoxically, can prove more expensive down the track if this leads to dispute, a partial intestacy or, in extreme cases, the need for clarification from the Supreme Court as to how the document should be interpreted.”

She advises her clients to approach estate planning by thinking about what they would do if something happened to them tomorrow, not in 30 years’ time.

“With estate planning, it’s difficult to crystal-ball gaze, so casting your eye too far in the future can act as a blocker to thinking. Estate plans should [also] be revisited every three years or so in response to significant life events, so you should view it as an ongoing and evolving process.”

• 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 own personal circumstances before making financial decisions.

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