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

"How sharper than a serpent's tooth it is to have a thankless child!" cried King Lear. "I'm the eldest boy!" a desperate Kendall Roy says to his brother and sister.  

Some of the most famous tragedies we know are stories of families torn apart by inheritance. Most people reading this have likely heard a horror story or two. The unequal split that sundered siblings, the will that came as a shock, the money that revealed what a relationship was truly worth.

We are in the midst of what’s been described as the largest intergenerational transfer of private wealth Australia has ever seen. Driven by ageing demographics, astonishing rises in property values, decades of superannuation accumulation, and a broadly strong economy, an estimated $5 trillion is moving from the richest generation in history to younger Australians.

And many of those younger Australians feel the burden of the intergenerational wealth divide before they've received a cent. Last year's Stake Ambition Report found that Millennials feel their wages aren’t keeping up with the cost of living. Gen Z increasingly believe that hard work alone is no longer enough - an inheritance is essential for financial progress.

That's a lot of money and a lot of anxiety prevailing across the generations. But for all the stakes involved, a culture of silence tends to persist. As Adam Dawes of Shaw and Partners explains, these conversations aren't really about money, they're about death and mortality.

In this interview, we explore why intergenerational wealth transfer is so often avoided, how families can approach it more effectively, and the simple conversation starters that can help navigate what is an emotionally charged and deeply personal subject. 

With the right approach, it doesn't have to end up like King Lear.

Six reasons people avoid the conversation

The latest white paper published by Shaw & Partners surveyed 630 of its own clients and found that only 42% had a clear wealth transfer plan. 

Their research with CoreData identified six psychological reasons people avoid the subject: fear of death, loss of control, not wanting to spoil children, dreading family conflict, complexity paralysis, and a reluctance to disclose wealth at all.

Of these, Adam says loss of control is the one he sees most often and is the most challenging to work through. "People spend so many years, decades, building wealth and controlling that wealth... that loss of control is one of the biggest issues."

There's also a generational pattern at work. Many people grew up in households where money was never discussed, and that silence tends to perpetuate itself. 

"I've got a lot of clients that their parents didn't talk to them about death or money, and then they don't see that they should do that with their children," says Dawes. 

"But most clients in their 80s should definitely be talking to their children - because what happens if you get run over by a bus tomorrow? And often it's too late once you've thought about it. It should have been done earlier."

Why a will isn't enough

Most people assume a will that splits things equally between children covers the bases. Dawes explains why there’s more to it than that. 

"A will is a document that shows the financial separation of assets. But a real intergenerational wealth plan should be talking about family values. It should be talking about how you want that money to be spent or used."

The white paper research also found that tax was the top concern for clients, while fair distribution of wealth ranked fourth. Adam thinks those priorities are the wrong way around.

"I've seen a lot of families spend a lot of time with that tax side of things, but not worrying about how the family's going to deal with it."

That said, tax still matters particularly for investors holding long-term share portfolios. As an example, if your parents bought CBA at $7, the tax implications of transferring shares now trading at $180 are significant and need to be worked through with an accountant before an estate is formed.

The letter of intent

One practical tool that can defuse a lot of conflict is a “reasons document”, essentially a letter of intent that aims to take out any potential misunderstandings and works alongside a will. 

It isn't a legal document, but a written explanation of the decisions behind a wealth transfer plan - who gets what and why.

"It takes out the misunderstanding of why these assets are going to be delivered or how they're going to be delivered,” Dawes explains. 

"We know funerals and wills can make families implode. And the arguments, no matter how small or how large that money is, generally come with some kind of resentment.:

Dawes says the document is one "that families should potentially live and breathe by, and grow over time."

Starting the transfer before death

There's a strong case for beginning wealth transfer during your lifetime, rather than leaving everything to a single event after death. Once an estate is formed, the legal rules are rigid. Dawes argues that while someone is alive, there's significantly more flexibility in timing, structure and tax planning. 

"A lot of elderly people have paid off their mortgage, they've got money in the bank, they're doing okay - but their kids are still paying off mortgages, sending their kids to school and struggling," says Dawes. "So maybe giving some money now to them so they can enjoy it...and it's nice to be able to see your kids enjoy that money."

For those with wealth tied up in property or a private business, who are asset-rich but cash-poor, Dawes says the conversation has a different complexity. 

"There has to be succession planning."

"With property, it's a big chunky wealth transfer. And obviously when you're moving from the family home and potentially to aged care, there are legal obligations, asset tests...it's too late once the parents have passed away. You've got to start early."

Three things to do now

For anyone who knows they should be having these conversations but hasn't started, Dawes lists three entry points:

1. Get the basics in place: Write a will and arrange your power of attorney, at a minimum. 

2. Get professional advice: ideally a coordinated team of a financial adviser, accountant, and solicitor working together.

3. Write a letter of intent: Put the reasoning behind your decisions on paper and share it with your loved ones while you still can.

And if none of that feels achievable right now, Dawes says there's an even simpler starting point.

"If we're all able to go home this weekend to our families and say, 'Okay, this is what we're doing' - or go to your parents and say, 'Have you got a will organised?' - I think that starts the conversation."

Have a question for Adam Dawes about wealth transfer, estate planning or talking to your family about inheritance? Adam and I are taking your questions.

Leave yours in the comments, or send it confidentially to [email protected] - we'll answer them in an upcoming session.