Intergenerational Wealth Starts with a Conversation

By Katrina Pulbrook, Executive Planner, RJS Wealth Management

Most families will talk about money when circumstances force them to.

A parent needs care. A business is being sold. Someone receives an inheritance. A will needs to be located. Children begin asking questions about a family property or trust.

By that point, the conversation is often taking place under pressure.

Intergenerational wealth planning should begin earlier.

It is not simply about deciding who receives an inheritance. It is about preparing the family, clarifying intentions and making sure financial, tax, legal and personal considerations are addressed together.

The assets matter.

But so do the people who will one day manage, receive or be affected by them.

A successful wealth transfer starts before the transfer itself.

Intergenerational wealth is more than an inheritance

When people hear the words “intergenerational wealth”, they often think of a large estate being passed from parents to children.

The reality is broader.

The transfer may happen after death, but it may also happen gradually.

Parents or grandparents may help with education, a first home, business funding, childcare costs or professional advice.

Each decision raises different questions.

How much support can be provided without affecting the giver’s retirement? Should assistance be equal between family members or based on need? Is the support a gift or a loan? What happens if a child separates from a partner? Are the recipients ready to manage the responsibility?

These questions cannot be answered by a will alone.

Silence allows assumptions to grow

Money can be an uncomfortable family topic.

Parents may worry that discussing wealth will create entitlement. Adult children may feel it is inappropriate to ask. Family members may assume everyone understands the plan without anyone having explained it.

Silence does not prevent expectations.

It allows each person to form their own.

One child may expect the family home to be retained. Another may expect it to be sold. A sibling working in the family business may assume they will take ownership. Other siblings may assume the business will be divided equally.

Those expectations can remain hidden for years.

Then a major event brings them into the open.

A family conversation does not need to begin with account balances or a detailed description of every asset.

It can begin with purpose.

Start by explaining what the wealth is for

Before discussing who receives what, consider what you want the family wealth to achieve.

These intentions shape the planning decisions that follow.

“Fair” may not always mean that each person receives the same asset or the same amount at the same time.

One child may have already received substantial financial support. Another may work in the family business. One family member may require ongoing care. A blended family may include competing responsibilities to a current partner and children from an earlier relationship.

There is no universal formula.

The aim is to make the reasoning clear, consider the consequences and document the arrangements properly.

PDF Download the Family Wealth Conversation Guide Use six practical conversation areas to prepare your family, identify questions and record the next steps.

Decide whether support should happen now or later

Many parents and grandparents want to help younger family members while they are alive.

They may prefer to see the benefit of their support rather than leave everything through an estate.

Providing support earlier can be meaningful, but it should not weaken the giver’s own financial position.

Before transferring money, consider:

• your expected retirement income
• future healthcare and aged-care needs
• access to emergency funds
• the effect on your cash flow
• whether the amount is a gift or a loan
• how the decision affects other family members
• whether legal documentation is needed
• whether tax, social security or asset-protection issues may arise

A generous decision made today may create financial pressure later if your own needs have not been properly assessed.

Personal financial, tax and legal advice may be required before acting.

Prepare the next generation before transferring responsibility

Passing on assets without passing on financial knowledge can leave the recipient unprepared.

Financial confidence is built through participation.

For younger children, that may begin with age-appropriate conversations about saving, spending and the household budget.

For adult children, the conversation may include:

• how the family approaches money
• why certain assets have been retained
• the purpose of a family business or trust
• who the family’s professional advisers are
• what responsibilities may come with an inheritance
• how financial decisions are made
• what records and documents exist
• where to seek advice before making major decisions

Katrina’s approach is to introduce financial education early and, where suitable, include clients’ adult children in advice conversations rather than waiting until they inherit assets they have never discussed.

The objective is not to tell the next generation what they must do with every dollar.

It is to give them the knowledge and professional connections needed to make sound decisions.

Your will is only one part of the plan

A current will is a central estate-planning document, but it may not control every asset.

The way an asset is owned can affect what happens to it.

Superannuation requires particular attention. Money held in super does not automatically form part of a person’s estate. A super fund may pay a death benefit to an eligible beneficiary or to the estate, depending on the fund rules, the nomination in place and the circumstances.

Beneficiary nominations and estate documents should also be reviewed after major life events such as marriage, separation, re-partnering, the birth of a child or a significant change in assets.

Because estate law and ownership structures can be complex, the financial adviser, accountant and solicitor may need to work together.

Blended families require earlier planning

Re-partnering can bring significant financial questions.

A person may want to provide for a current partner while also protecting assets intended for children from an earlier relationship.

The family may hold separate assets brought into the relationship, a jointly owned home, family trusts, businesses, different superannuation balances, previous financial commitments and children with different needs.

Without a coordinated plan, one document or ownership decision may produce an outcome that does not reflect the family’s intentions.

The conversation should consider:

• what each partner owns
• who depends financially on each person
• where each partner would live if the other died
• how children from previous relationships will be treated
• how superannuation and insurance may be paid
• who will make financial and medical decisions if capacity is lost
• whether existing documents still reflect the current relationship

These discussions can feel uncomfortable.

They are usually easier to manage while everyone is healthy and able to participate calmly.

Business succession and family succession are not the same thing

For business owners, the business may represent a large share of the family’s wealth.

That creates two related but separate questions:

Who should own the business — and who is capable of running it?

A child may be suitable to receive an economic interest without being the right person to manage day-to-day operations.

One child may already work in the business while others have chosen different careers. Passing ownership equally may appear fair but create operational problems. Passing the business to one child may create concerns about how the other children are treated.

The plan may need to address:

• future ownership and management responsibility
• business valuation and funding the transfer
• tax considerations
• treatment of family members outside the business
• insurance and shareholder agreements
• retirement income for the current owners
• what happens if the intended successor changes their mind

Business succession should not begin when the owner is ready to leave.

It should begin while there is enough time to prepare the business and the people involved.

Five family wealth conversations worth starting

What families do not need to discuss immediately

Starting the conversation does not mean disclosing every account balance at the next family dinner.

You can begin without revealing:

• the exact value of the estate
• detailed investment holdings
• passwords or security information
• final distributions that have not been decided
• private financial information that is not relevant to the other person’s role

The first step is creating context.

Explain that planning is underway, what principles are guiding it and who will be involved.

Details can be shared gradually and only with the people who need them.

A successful transfer is measured by more than tax

Tax and structure are significant parts of intergenerational wealth planning.

They are not the only measures of success.

A technically sound arrangement can still create poor outcomes when:

• family members do not understand it
• the recipient is not financially prepared
• responsibilities are unclear
• expectations have never been discussed
• documents contradict each other
• the family cannot locate important information
• the plan no longer reflects current relationships

The strongest plans connect structure with communication.

They consider both the assets being transferred and the people receiving them.

Start while the conversation is still a choice

Families often postpone wealth conversations because there never seems to be a suitable moment.

There may never be a perfect one.

The better time is usually before a death, illness, business sale or family dispute makes the discussion urgent.

Start with a simple question:

What would we want our family to understand if they had to manage these decisions without us?

The answer can guide the next conversation, the documents that need reviewing and the professionals who should be involved.