Multi-generational Wealth Sharing & Transfer
Empowering Your Family Through Proactive Wealth Sharing
At EWM, our financial planners don’t just advocate for “maximising your wealth.” We design strategies to help you achieve your financial and personal goals, aligning your financial journey with your aspirations and values. For many of our clients, this often involves multi-generational wealth sharing and transfer.
In today’s economic climate, it is not uncommon for people to want to provide financial assistance or a legacy to their children or other family members. Still, they are nervous about relinquishing complete control of the funds for many valid reasons. But waiting until you’re gone to help your loved ones might not be the most efficient or impactful choice either. There are many different ways you can help now while still protecting your own financial position, your investments and your family members. It’s about creating a legacy of support and empowerment beyond an inheritance.
Benefits of Multi-generational Wealth Sharing and Transfer
The benefits of sharing your wealth appropriately while you are still alive include the ability to:
- Address Immediate Needs: Life is unpredictable, and unexpected financial challenges can arise when you least expect them. By sharing your wealth while you’re alive, you can address immediate family needs. Whether it’s funding education, supporting a child’s home ownership or entrepreneurial dream, or helping a family member during tough times, your assistance can make a significant difference when needed.
- Nurture Financial Wisdom: There are plenty of horror stories of inheritances blown by financially inexperienced beneficiaries. By providing financial support while you’re still alive, potentially with ‘strings attached’ initially, you can guide, educate and empower your family members on how to manage their finances responsibly, make informed investment decisions, and build their wealth. This fosters a sense of self-reliance and financial responsibility that will protect your legacy in the long term.
- Strengthen Family Bonds: Sharing wealth while alive can strengthen family bonds. It promotes open and honest conversations about financial matters, aligning family values and creating a sense of unity. It’s an opportunity to teach your loved ones about the importance of responsible financial stewardship. Sharing your wealth while you’re alive allows you to align your financial actions with your family values, and it will enable you to see the impact of your generosity firsthand. You can witness the positive changes it brings to the lives of your family members and actively participate in their financial journeys.
Issues to consider with Multi-generation Wealth Sharing and Transfer
However, it is important to be careful about how your financial assistance is structured. There are a variety of issues and risks to consider:
Outright gifting obviously causes a loss of control over the funds. Even worse, if the recipient experiences issues such as addiction, bankruptcy, divorce or even death, a total loss of funds may result.
You can lend money to family members, but it’s important to determine the loan repayment schedule and decide how much interest to charge.
Agreements to enter into co-ownership of assets, such as residential real estate, can result in nasty income tax, capital gains tax and stamp duty surprises, and significant issues if one party wants to sell but the other doesn’t.
Never guarantee loans for someone else, and if you must, ensure you implement protection mechanisms to mitigate risks.
Always consider Estate Planning issues to ensure that gifts and loans are taken into account in your will so that each of your beneficiaries receives the correct net benefit from your Estate.
Be careful about where the money comes from, e.g. which investments you are liquidating to generate the money to share. The sale could result in a capital gains tax bill, so retaining enough money to meet that liability in due course is essential.
If you withdraw money from your super fund and expect repayment and re-contribution, ensure you meet the eligibility criteria for contributions, such as age tests, work tests, and total super balance caps.
Note that Centrelink has strict gifting rules. And an increase in income or assets of the recipient can impact their Centrelink entitlements.
Waiting until you’re no longer here to share your wealth may not align with your family’s immediate and evolving needs. By being proactive and making thoughtful financial decisions while you’re alive, you can have a more direct and positive impact on the lives of your loved ones.
Talk to us to explore the strategies available for sharing or transitioning wealth to your children. We can tailor strategies that allow you to extend financial assistance while introducing safeguards that protect the assets and your family. By crafting solutions with carefully considered “strings attached,” we ensure your assistance is structured correctly so your intentions are honoured, and your financial legacy thrives. Your children are educated and empowered without being vulnerable to undue risks.