Angela Mollard: How inheritance business is rapidly becoming fraught to the point of toxic

The great wealth transfer has been heralded as a financial lifeline for many – but what few are talking about is the growing conflict and potential implosion within families, writes Angela Mollard.

Parents are “spending the kids’ inheritance”.

My friend, typically a genial sort, has steam coming out her ears.

Her parents, she tells me, are celebrating their 50th wedding anniversary.

“Oh, that’s lovely …” I enthuse.

“Yes, it is lovely,” she grimaces, “but they’re going all out. Four months in Europe, first class flights, a cruise down the Rhine and they’ve booked to stay in a castle in France. My dad keeps calling it his SKI holiday …”

My friend drops her voice to a whisper. “He’s telling anyone who will listen that he’s ‘Spending the Kids’ Inheritance’. My brother is apoplectic and together we’ve calculated they’re dropping about $200K on the trip.”

Some Boomers are preferring to spend on adventures like a Rhine River cruise than leave money for their children. Picture: Supplied

It does not seem the moment to point out that presumably her parents worked very hard for their money and, having notched up 50 years of marriage, have every right to celebrate the occasion. Instead, I promise to send her an article expressing similar sentiments.

“My inheritance is being drunk through a straw in a coconut in the Caribbean,” fumes the writer.

The great wealth transfer has been heralded as a financial lifeline for many. Picture: iStock.

“Yes!” my friend texts back. “Is it really that distasteful to resent my parents for frittering money that should be mine? After all, they inherited money from their parents.”

Oh dear. The great wealth transfer which will see Australia’s over-60s bequeath around $3.5 trillion of their money to younger generations in the next 20 years has been heralded as a financial lifeline for many.

But what few are talking about is the growing conflict and potential implosion within families as generations with different attitudes and expectations wrangle over who is entitled to what. As lawyer and estate planner Brian Herd tells me, throw in blended families, “compactos”, “martyr children” and “FOFO” and the inheritance business is rapidly becoming fraught to the point of toxic.

But first he tells me about “Ken and Barbie syndrome”. As he explains, he’ll have a long-established couple sitting in front of him and they may not have considered what the other might do after they die.

“The survivor could last a long time,” he says. “For instance, the woman might go to a line dancing class at the local RSL where she’ll meet a Ken. She becomes so enamoured of Ken that she races off and changes her will. Or the opposite could happen. He goes to the class and meets a Barbie.”

Brian, who works for Brisbane’s HopgoodGanim Lawyers, didn’t use to raise the issue but times have changed. Couples, he says, generally have two responses.

“Their first reaction is to look at each other simultaneously and say: ‘You wouldn’t do that’. Or the other reaction is the woman looks straight at me and says: ‘Who would want him’?”

And that’s just the couple. Never mind what their kids think when mum or dad refuses to resign themselves to a lonely old age and instead partners up with a potentially younger model.

In the past, an inheritance was often a delightful surprise. It wasn’t something you talked about, far less demanded. But in the age of entitlement everyone has their eyes on, if not their fingers in, the prize. And Millennials, burdened by hefty mortgages and raising children, are the most grasping. Research this year by Vanguard showed 45 per cent of Millennials believed retirees should leave money to their children while 40 per cent said they should prioritise enjoying their own money.

By focusing on their financial legacy, few parents nearing retirement are considering their relationship legacy.

As for those holding the purse strings, for every proud globetrotting, Grange-sipping “SKIer”, there’s another retiree crippled with FOFO – or “fear of falling out” with their loved ones. In the tension over inheritances, they worry about being denied access to grandchildren, gifting money to one more needy child over another, or skipping their children and bequeathing money directly to their grandchildren.

As Brian points out, they might be frustrated by a child on their third marriage and might want to bypass them altogether out of concern about where their inheritance might end up. There’s also potential conflict around what the industry calls “martyr” children – those who step in to care or house an elderly parent to save money on aged care expenses. As he says, it sounds straightforward in practice until the child living in Equatorial Guinea arcs up when the elderly parent changes their will to give more to the child who looks after them.

Oh, and Brian has also dealt with offspring infuriated that a sibling nominated to have enduring power of attorney (EPA) over their parents has used the privilege to plunder the inheritance.

What’s clear is that on focusing on their financial legacy, few are considering their relationship legacy – or what sort of emotional state they’ll leave their family in.

As for my friend fretting about her parents gallivanting around Europe and buying up large in the vineyards around their chateau in Bordeaux, I did offer one consoling comment: “They might bring you back a bottle.”

Originally published as Angela Mollard: How inheritance business is rapidly becoming fraught to the point of toxic