The Great Wealth Transfer: Are you ready for it?

Posted by Robin Powell on August 23, 2021

The Great Wealth Transfer: Are you ready for it?



While human beings’ life expectancy in developed economies is around 80 years these days, the longevity of the wealth they generate, acquire or inherit during their lifetimes can continue well beyond those four score years. Indeed, the Great Wealth Transfer — the handing down of of wealth from Baby Boomers to younger generations — is well under way. The complexities involved in thinking about what happens to your estate beyond your own temporal horizon are another key reason to seek financial advice.


Reason #6: Thinking about the next generation


They call it the Great Wealth Transfer. And it is already underway. The baby boom generation — born between 1946 and 1964 and now aged from their late-50s to mid-70s — are in the process of deciding what happens to their money after they die.

The financial name for this process of distributing your wealth to the next generations is “estate planning” and it is a veritable minefield for the untrained — involving complex issues around tax, liquidity, pensions, aged care, and, most of all, family politics.

The sums involved are eye-watering. In the US, the inter-generational wealth transfer has been estimated at $US30 trillion and above. In the UK, according to Kings Court Trust, about £5.5 trillion will be transferred over the next couple of decades. In Australia, according to Griffith University, the sum is about $US2.6 trillion.

Accelerating the size of the pot in recent years have been booming equity and property markets, fuelled by record low interest rates. In the UK, the change in rules allowing family members to inherit a pension has expanded the pool of transferable money. In Australia, too, people are dying with large nest eggs of $200,000 or more.


Act early

For those of us still working or in the early stages of retirement, these decisions about what to do with our accumulated wealth may still seem too far away to worry about. After all, we are living longer these days and the notion of “retirement” is not what it was. Many people keep working well past 70.

Even so, ask any planner what it is like having to deal with wealth transitions after death, even with a well-documented will, and you may have second thoughts about leaving it till the last possible moment. The possibility of increasing frailty and the loss of mental agility also argues against delaying putting a proper plan in place.

In a recent report on intergenerational wealth transfer, Russell Investments UK makes the case for beginning the wealth transition much earlier or at least opening up the discussion with beneficiaries.

“As clients age and approach the end of life, the number of so-called ‘vulnerable clients’ will increase, bringing with them a whole host of new needs and challenges,” Russell warns. “Critically, many benefactors haven’t fully thought about, or made thorough plans, for even the most basic transference of wealth.”


Providing certainty

This foresight is not only for the sake of the children but for the sake of benefactors themselves. Consulting a planner early can increase your sense of certainty over how your assets will be managed when you can no longer look after your own affairs.

Another consideration is ensuring your assets go to the right beneficiaries at the right time, while protecting their inheritance in the event of divorce or bankruptcy.

An adviser can ensure you have a plan in place to cater for your remaining needs and for the future needs of your beneficiaries. Knowing this all well ahead of time can save an awful lot of expense, complexity and heartache.

Tax considerations around inheritances are also complex. In the UK, there are reasonably generous limits on inheritance tax but it is still a detail you will want to keep on top of while you are still able to.


Ensuring continuity

Another reason to consult an adviser earlier is continuity. By setting a plan in place well before it becomes urgent, you increase the chances that the next generation will stick with those arrangements. Otherwise, what tends to happen is they seek advice elsewhere, everything is undone and the family loses control of the assets.

In other words, the conversation about wealth transfer works best if the whole family is involved and there is a continuity of advice across generations.

To paraphrase an old quote, while you can’t predict the future you can enable it. That’s what estate planning is all about.

So, are you ready for the Great Wealth Transfer? If not, you ought to speak to a financial planner.


Missed the first five parts in this series? You can catch up here:

Always seek a second opinion

Do well and do good

New start? Speak to an adviser

Complexity: another reason to seek advice

Advising on life’s big changes



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Robin Powell

Robin is a journalist and campaigner for positive change in global investing. He runs Regis Media, a niche provider of content marketing for financial advice firms with an evidence-based investment philosophy. He also works as a consultant to other disruptive firms in the investing sector.


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