Cars and vehicles (60 per cent) then outrank investments (38 per cent) and collectibles (32 per cent). Pension benefits and annuities (23 per cent) round out the list.
It’s a rare, granular insight into a phenomenon we see all around us that’s officially called the intergenerational wealth transfer.
There will be $4.9 trillion changing hands in the coming decades, moving down the chain from the older generation to the younger, according to JBWere research.
And yes, if there is wealth to speak of in your family, the big question is: when? That’s whether you are the parent or child in the scenario because inextricably related is burning need, precisely what has given rise – and rise – to the bank of mum and dad in recent years.
Estimated to now be between the country’s fifth and ninth-largest lender, the average home-loan deposit help given by parents today is $74,040, says Mozo – $4113 more than in 2021.
And 75 per cent of parents no longer expect to be repaid, up from 33 per cent in 2021.
So how do you time the help and deliver it such that all family members stay protected? You may never have thought of the risks with a “living inheritance”.
Here are four safety considerations.
Will parents’ pensions be affected?
Under the Family Services deprivation of assets rules, you can give away only $10,000 a financial year, or $30,000 over five years, without affecting your eligibility for the age pension. If a pension is a key part of a retirement plan, know it may be impacted for this time.
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Could the money flow out of the family during break-ups?
What would happen if a son’s or daughter’s relationship goes south? Because the last thing anyone wants is the money being sucked into the asset pool of a separation settlement. Experts advise not gifts, but documented loans for this reason – with a condition that they must be repaid, and with at least a nominated time for that to happen. It’s then a liability not an asset.
Could it cause a will dispute?
Well, firstly, you have to have one to dispute one, so make sure you are onto that. (Colonial First State’s survey found only 38 per cent of people have a will.) But, secondly, yes it could. Again, the above documentations will help.
And be aware of the common misconception about wills where the intention is to cut someone out of one: leaving them just $1 or other nominal amount will not head off legal action. This does not inoculate the will from contest. Ditto if you think it would help if there’s a clause that says anyone who challenges this will would receive nothing. A court will ignore it.
Could parents run out of money?
This is the big one to my mind: the risk of what I call complete cash-astrophe … or the benefactors leaving themselves short.
Sure, you might have a large family home that could later be downsized to free up money (and $300,000 per owner can now be sheltered in super).
But that switches the pension-exempt money currently tied up in the family home into a potentially pension-cancelling stash.
And then there might be the need to fund decent aged care.
Many Australians live a lot of life in – long – retirement. Giving a living inheritance needs a whole-of-family safety strategy.
Nicole Pedersen-McKinnon is author of How to Get Mortgage-Free Like Me, available at www.nicolessmartmoney.com. Follow Nicole on Facebook, X and Instagram.
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 any financial decisions.
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