Passing on wealth without tearing your family apart - your questions answered

Australia is in the midst of the largest intergenerational transfer of private wealth in its history, with an estimated $5 trillion changing hands. Yet, for all the money and family stakes involved, a culture of silence and a shocking lack of foresight and planning persists. 

As Adam Dawes of Shaw and Partners explained in our first discussion on the topic, these conversations aren't really about money - they're about death and mortality. In that session, we walked through the psychological side of passing on wealth, why a will alone isn't enough, and the practical steps you can take immediately to get your affairs in order. 

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Why a will isn't enough - the wealth transfer conversation families need to have

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We put a callout to the Livewire audience for their most pressing questions, received a stack of responses, and brought Adam back to work through them. Watch the Livewire audience-driven Q&A in full above, or read on for the recap. 

1. Should you pass assets to your kids while you're alive, or leave it in a will?

Dawes says gifting in your lifetime can make a lot of sense, but timing matters - for example, when the beneficiaries of that wealth are at a stage of life that they are equipped for. "Boys at 18 versus at 25, their levels are a little bit different," he notes.

Dawes says that broadly speaking, most people would rather see their children reap the benefits of the money while they are alive. "Gifting somebody money at 35 and seeing them enjoy it potentially might be a better way than when they're at 60, and you've passed away."

That said, there are tax implications on both sides, whether it’s passed during your lifetime or via an inheritance, so professional advice from a tax accountant is essential.

2. If you've helped one child financially, how do you protect the others?

This is where things get complicated. One child might be working in the family business while another might have been the primary carer at home. Both can feel entitled to a larger share, and without clarity, that tension can cause major family conflict.

Dawes recommends documenting any major financial assistance in the will itself, specifying whether it was a loan to be repaid or an advance on inheritance.

"In your will, you can talk about how you've already gifted $300,000 to one child and whether that's going to be paid back," he says. Transparency is the buffer against family fallout. "We see families literally imploding on the back of a little bit of money that the parents have left."

This is also where the letter of intent becomes useful, as discussed in part one. It's not a legal document, but it sits alongside the will and explains the reasoning behind decisions, which can go a long way to mitigating family disputes.

3. How do you financially protect a partner while making sure your assets go to your children?

"Documentation and structure are the two most important parts of everything in wealth transfer," Dawes says. When the family home is the primary asset, this becomes even more critical.

A common structure is allowing a surviving partner to remain in the family home until they pass, with the capital then flowing to the children once the property is sold. "You can rule from the grave on a lot of these things," he says. 

4. If a child dies before you, how do you protect their share for your grandchildren?

A testamentary trust is the best vehicle for this. It allows rules to be set around how and when beneficiaries can access funds, which is particularly useful if grandchildren are very young or haven't yet developed the financial discipline to manage a lump sum of money.

The trust can allow income access over time, with conditions attached to preserve the capital for the next generation.

5. How do cash gifts and share portfolios affect what you'll pay for aged care?

"This is an absolute minefield," Dawes says, "If you are gifting a child cash or trying to get rid of assets, that doesn't mean it automatically disappears. The tax department pretty much knows what's going on, and they can see that."

Getting the timing and structure right around deeming rules and asset thresholds can affect how much you pay in residential aged care. Dawes says tasking a financial planner who specialises in aged care, not just a generalist, makes a difference.

6. Can you stop an estranged child from challenging your will?

Not entirely, Dawes says. The best defence is airtight documentation and a will that clearly articulates your intentions. Once probate is granted, the picture changes, but while you're alive, structure and documentation are your strongest tools.

7. What three documents should adult children actually verify?

Don't take a parent's word that everything is sorted. Dawes says to confirm three things - the will, the enduring power of attorney and superannuation beneficiary nominations. The last one catches many people off guard. "The will doesn't follow the superannuation. They don't sit side by side.”

8. How often should you review your will?

Every two to three years, at minimum, Dawes says. Major life events such as a birth, a death, or a change in tax law, are all triggers. 

"Big milestones in your life and in your family's life are a really good opportunity to pull it back out again, dust it off, and see if it's relevant to what the situation is today."