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Beyond money: building a legacy that lasts
Intergenerational wealth is about more than just passing down assets. It’s about securing financial stability, creating opportunities, and ensuring your family thrives across generations. Thoughtful estate planning can prevent costly disputes and safeguard your wealth from unnecessary risks.
Without a valid Will, Australian state laws dictate how assets are distributed, often in ways that don’t align with your intentions. With more than half of Australia lacking a Will, many estates risk being divided through intestacy laws rather than personal choice. Given the rising value of property and superannuation, many estates are now worth millions – making making careful planning more important than ever.
Legacy vs tragedy: striking the right balance
A well-planned inheritance strengthens families, providing financial security and reinforcing shared values. However, poor planning can lead to conflict, with disputes over assets, squandered wealth, and tax burdens reducing the intended benefits.
To prevent these issues, consider these key steps:
- Have open conversations: discuss your inheritance plans with family members to set expectations and instill financial responsibility.
- Prepare for your unique challenges: think about the complexities of blended families, estranged relatives, and beneficiaries with special needs.
- Get expert guidance: a financial planner and estate lawyer can help create a structured plan that protects your legacy.
Education funding: investing in future generations
One of the most meaningful ways to support future generations is through education. With private school tuition exceeding $30,000 per year and university costs often surpassing $50,000, setting aside funds for education can provide lasting benefits.
Smart ways to fund education
- Education bonds: these tax-efficient savings vehicles allow tax-free withdrawals after 10 years.
- Prepaid tuition funds: some private schools offer tuition prepayment options, locking in today’s rates.
- Family trusts: allocating funds for education within a trust structure can optimise tax benefits and protect assets.
By prioritising education, families can empower their children to build their own financial stability rather than relying solely on inherited wealth.
Testamentary trusts: preserving wealth beyond your lifetime
A testamentary trust, established within a will, allows you to maintain control over asset distribution while offering tax advantages and protection from financial risks.
Why consider a testamentary trust?
- Tax efficiency: income can be distributed to minors using adult tax-free thresholds (first $18,200 is tax-free).
- Asset protection: shields wealth from creditors, lawsuits, and relationship breakdowns.
- Controlled distributions: allows structured payouts, for example, releasing funds once a child completes university or reaches a certain age.
Instead of leaving large lump-sum inheritances, testamentary trusts ensure responsible wealth management that can last for decades or generations.
Family trusts: strategic wealth management while you’re alive
Unlike testamentary trusts, family trusts are created during your lifetime, allowing you to manage assets and distribute wealth flexibly.
Key benefits of family trusts
- Tax optimisation: income can be allocated to family members in lower tax brackets, reducing the overall burden.
- Asset protection: helps safeguard investments from legal claims or insolvency risks.
- Long-term succession planning: trusts can remain active for up to 80 years or indefinitely in South Australia, benefiting multiple generations.
Family trusts require careful management, especially with recent ATO scrutiny on trust distributions, making professional advice essential.
Practical steps for sustainable wealth transfer
- Engage trusted experts: a qualified financial planner and estate lawyer can guide your strategy.
- Draft a proper Will: ensure detailed instructions to prevent legal disputes over asset distribution.
- Plan for superannuation transfers: binding nominations can help transfer funds efficiently.
- Educate heirs on financial responsibility: teaching younger generations about wealth management reduces the risk of inheritance mismanagement.
Understand tax implications: capital gains tax (CGT), stamp duty, and trust administration costs should be factored into your planning.
Philanthropy: giving with warm hands
Unlike personal income, estate assets don’t qualify for tax-deductible donations, so charitable giving should be structured during your lifetime rather than through your will.
Supporting meaningful causes while managing tax obligations can be a valuable part of your wealth strategy.
Conclusion: wealth that builds, not destroys
Intergenerational wealth should be a source of opportunity, not conflict. By thinking ahead, involving professionals, and ensuring your family understands responsible financial management, your wealth can strengthen generations to come.
Starting early, educating heirs, and using trusts wisely allows you to create a lasting legacy – one that reflects both financial success and the values you hold dear.
Meet Joel at Solace Financal or Find a Planner near you!
The Money & Life website is operated by the Financial Advice Association (FAAA). The views expressed in this article are those of the author and not those of the FAAA. The FAAA does not endorse or otherwise assume responsibility for any financial product advice which may be contained in the article. Nor does it endorse or assume responsibility for the information.
