Australians inherited an estimated $150 billion in 2024, an increase of more than 70 per cent in a decade, according to a JBWere report.i
It’s a number that’s predicted to grow more rapidly over the coming 20 years to $5.4 trillion, the report finds.
Managing this flow of wealth to family groups, often complicated by divorce and remarriage as well as children from previous marriages, can lead to disputes and legal challenges if not carefully handled.
Legal firms agree that the number of challenges to wills has been increasing each year with adult children most likely to take action. One firm estimates more than 60 per cent of claims are brought by adult children and around 20 per cent by partners or ex-partners.ii
Yet, many still do not have wills.
In the latest research available, the Australian Law Reform Commission found that almost 40 per cent of adult Australians did not have a will although, this figure declined to 7 per cent for those older over 70.iii
If you die intestate in Australia, your estate is distributed according to state and territory laws, and the laws vary slightly between each state and territory. Generally, the estate goes to the next of kin starting with the surviving spouse or partner followed by children, parents, siblings and then other relatives. If no relatives can be found, the estate may go to the government.
So, if it is important to you to have a say in how your assets will be distributed, a will is a must.
Meanwhile, for those in a new partnership but have children from a previous marriage, a binding financial agreement can be a useful way of protecting your partner’s interests if something happens to you.
It’s a legally enforceable contract that details how assets, liabilities and responsibilities will be divided if you separate, divorce or one partner dies.
Designing your transfer of wealth
Distributing your wealth now or later can depend on the family dynamics, any businesses you may own and whether you have a passion for creating a legacy – donating to a charity, for example. Alternatively, you may prefer to spend it on yourself and your partner to enjoy your later years.
The housing crisis and the emergence of the ‘bank of mum and dad’ has increasingly seen wealth transfer happening while the benefactor is still alive. You may wish to help your children or grandchildren to get a foot onto the property ladder, contribute to their superannuation, or pay their school fees or student loans. But it’s crucial to obtain professional advice to understand any consequences of giving lump sums, particularly those receiving government entitlements, as they could potentially be impacted.
Another alternative is testamentary trust. This is commonly used to provide financial security for beneficiaries, such as family members or loved ones. It is used to manage and distribute assets according to specific instructions laid out in the will.
It can be specifically written and incorporated in your will and takes effect when you pass away. It is administered by a trustee, who you would also name in your will. The trustee would take legal control over the trust assets and is responsible for the management and distribution of the assets to the beneficiaries, based on the instructions in the trust.
This strategy could also potentially minimise any tax liabilities. However, there are a lot of things you need to consider when deciding whether or not a testamentary trust is right for you.
Some might prefer to establish or contribute to a charitable foundation as a way of building a family legacy. It’s a move that allows you to have some say over how your hard-earned wealth is distributed and could involve family members to allow them to build knowledge and experience in philanthropy.
Most importantly, creating a family legacy relies primarily on the strength of family relationships. Any disputes will more than likely be magnified after a death and some relationships may be strained, so it may be helpful to discuss your intentions with family members and any other beneficiaries. Be clear about your plans and don’t ignore negative reactions.
Getting your affairs in order
After all, wealth transfer isn’t just about finances—it’s about securing family harmony and ensuring your legacy is preserved according to your wishes. Taking the time to plan, communicate openly with loved ones, and seek professional guidance can make all the difference.
ii The numbers don’t lie | Solomon Hollet Lawyers
iii Wills | ALRC
