Rethinking how you pass on wealth
The default in estate planning is leaving everything to your spouse and/or children in equal amounts. However, lengthening lifespans, changing economic factors as well as family dynamics are reshaping how we pass on our wealth across generations.
More families I speak to are considering how to transfer wealth meaningfully for their specific situation and not adopt this default approach. I explore some of these considerations below.
The default option
The logic of leaving everything to your children is emotional before it is financial, and there's nothing wrong with that. They are your children and providing for them is instinctual. For most of human history it was also efficient: parents died relatively young, children inherited in their twenties or thirties and the capital arrived exactly when it was needed to build a household and family.
However people are living longer and having children later, so a parent who dies in their 80s or 90s may have children who are in their 50s and 60s. Life expectancy at birth in Australia now sits at 81.1 years for men and 85.1 years for women, increasing over the last decade [ABS]. The Grattan Institute finds that the most common age bracket for receiving an inheritance in Australia is now 55 to 59, with today's inheritances increasingly flowing to people who are "already middle-aged."
By 55, most people have made their major financial decisions already. The mortgage is paid down or gone. The career has plateaued or peaked. With the average age of giving birth in Australia at 29.9 years for females [Australian Institute of Health and Welfare] and the average age of children leaving home at 23-24 [HILDA]; by the time a parent reaches their mid-fifties, their own kids have usually already moved out.
An inheritance at this stage doesn't open doors so much as it pads a retirement account that was already going to be fine. An inheritance at 55 is most certainly a welcome windfall but possibly not transformational, highlighting the flaw in the conventional approach. The inheritance delivers capital to people at the point in life when they need it least.
Grandchildren
If we use the same math above, your grandchildren are in their 20s to 30s and most likely have moved out of home. They are building their careers or businesses, paying down university debt, trying to buy a property or cover the rent. Some may even be starting families of their own.
This is the life stage where capital can significantly change trajectories. A first home funded, an elite education paid for, a meaningful contribution of seed capital for a business, an investment portfolio underway and compounding.
This is Warren Buffett's often-quoted position on inheritance, reframed by generation rather than amount: leave enough that someone can do anything, not so much that they do nothing. Applied here, the money matters most exactly where it can still shape a choice and provide a launchpad.
The obvious concern is the suddenly wealthy young person with no framework to responsibly steward and invest the wealth. It's a reasonable concern and requires a thoughtful process built around early succession, communication and staged distributions.
Succession: there is no better time to start involving young people with the business of family than yesterday. When family members understand the origin of wealth, the family’s values and legacy, their stewardship tends to be better aligned.
Communication: talking openly about your estate plan when alive, whilst seemingly confronting death, is a gift to your legacy and ensures family members understand your wishes.
Staging: correlate distributions with conditions linked to the family’s goals such as completed education, sustained employment, or a matched contribution toward a house deposit rather than the whole amount.
There is also a psychological dimension to leaving an inheritance to grandchildren that most families feel but rarely say out loud. The parent-child relationship carries history: years of authority, comparison, discipline and the ordinary friction of raising someone. Money passed there inherits that history too. It can read as reward, as apology or as a final word in an old argument that was never really about money at all.
The grandparent-grandchild relationship is usually unburdened by any of that. It was built on affection without the daily responsibility of raising them: birthdays, encouragement and the freedom to be generous without also having to be the disciplinarian. First and third generations, in most families, are still simply loving and hopeful about each other. There's rarely accumulated damage to work around. A significant gift skipping a generation typically lands on the most uncomplicated relationship in the family, which is no small thing when the amount involved is large enough to change how people feel about each other.
In this situation, however, I'd refer back to the earlier point on communication. Talking through your estate plan and wishes should involve both the people who will benefit and those who won't. For the latter, it matters that they understand why, and, where the situation allows, that they're provided for in other ways.
Discussing your estate plan can feel like confronting your own mortality, and I haven't met many people who enjoy that conversation outside their lawyer's office. But to avoid a contested will, and to protect your family and your legacy, I always urge my clients to have this conversation while they still can.
Giving while living
None of this needs to wait for death. Giving while living means paying directly for your children’s or grandchildren’s significant costs when they need it most and allows you the benefit of enjoying the outcome.
Some examples are: paying school and university fees directly, gifting a first car, contributing to a house deposit, covering medical bills or insurance, funding a gap year or a first business attempt: these are all wealth transfers, timed for when they matter and in line with where you would like the money to be spent.
Many of these gifts benefit your children directly or indirectly too, since they're costs your children would otherwise be carrying themselves. A grandparent who funds a grandchild's degree isn't just helping the grandchild; they're freeing up their own child's cash flow, often at the exact moment that child is stretched thin raising a family.
Splitting the difference
Of course, many families land on a middle path with the estate split between children and grandchildren, or children inheriting outright with an expectation that they'll pass some down themselves.
This option provides real merit as it honours the relationship with your children whilst acknowledging that your grandchildren are also beneficiaries of your generosity. It can also relieve your children of the pressure to help their own children financially and simply don't have the means to do it generously. A share to the grandchildren, structured well, does that job for them.
One advantage of splitting the inheritance across children and grandchildren is moderation with smaller sums to each generation meaning the amount to any one person is unlikely to be so large it becomes demotivating, but also unlikely to be so small it's forgettable.
Conversely, dividing the wealth across many beneficiaries in smaller amounts may lead to limited intergenerational impact and erosion of legacy. By one widely told account, when over a hundred Vanderbilt descendants gathered for a family reunion in 1973, not one was a millionaire, due to a vast fortune distributed without structure or intention.
Legal structures
Making the decision of who will receive what is only one part of estate planning, understanding the structures you can use to optimise outcomes is also important. Whilst I am not a lawyer, this section gives a good overview of your options and some talking points for when you’re planning.
Testamentary trusts: Created by your will, they only come into existence on death. Thankfully these have been excluded from the recent changes to the trust tax rates and the real value is control and asset protection. A trustee, not the beneficiary, decides when and how funds are released. The trust can generally run for up to 80 years in most Australian states, which is long enough to genuinely direct capital across three or four generations rather than handing it over once and hoping.
Discretionary (family) trusts: The lifetime equivalent, useful for giving while you're still here rather than waiting for death. Whilst the tax rates have recently increased on these trusts, the benefit of asset protection is still valuable.
Life interest and protective trusts: One beneficiary receives the income or use of an asset for life, often a surviving spouse or a vulnerable child, while the capital is preserved and passes to the next generation on their death. This is frequently the answer to blended-family and vulnerability scenarios that an outright gift to either side can't solve cleanly.
Special disability trusts: Purpose-built for a beneficiary with significant support needs, structured so the gift doesn't jeopardise means-tested support they already rely on.
Corporate trustees: Using a company rather than an individual as trustee removes the fragility of leaning on one person's judgment, memory, or health across decades, and gives the structure genuine continuity as directors change over generations.
Superannuation death benefit nominations: Easy to overlook because super sits outside the estate, but a binding nomination is a formal direction to your super fund telling the trustee who must receive your superannuation death benefit when you die. Typically grandchildren cannot be nominated unless they are financially dependent on you.
The letter of wishes: Not a legal structure, but this document makes all of the above actually reflect your intention. It guides a trustee's discretion and gives your family the reasoning behind an unequal or staged distribution, which is often what determines whether a fair decision is received as fair.
Estates typically use a number of these structures to achieve outcomes.
Equal versus Fair
I have so many conversations in families around the concept of equal versus fair. If we go back to the default position for estate planning, most people leave their estate to their children in equal portions. But what if the beneficiaries have different circumstances that warrant a different outcome? Consider a few scenarios below:
One beneficiary has a disability that precludes them from financially supporting themselves, and assistance with their daily living needs and care is required long after the parents have passed,
One child doesn’t have grandchildren and the others do, which may prompt a discussion of apportionment based on the total number of beneficiaries,
One child has married into significant wealth or had significant success in exiting a business, and the inheritance may not have as much meaning to that beneficiary,
Lifetime gifts already made to beneficiaries, such as the classic example of farming families bestowing the farm to one child during their lifetime and their remaining wealth to the other children on their passing,
Blended families, a topic explored in depth on episode one of the Significant Women podcast,
Involvement in the family business may result in the child who worked in the business inheriting more so that significant debt or a sale is not required in the event other family shareholders do not want ongoing involvement.
Equal asks how much each person receives. Fair asks what that amount will actually do for that person, in their circumstances and at their stage of life. Equal has always been the easier default, because it asks nothing of you beyond division. Fair asks you to look closely at each person's life and make a judgment call, which is sometimes uncomfortable, and is exactly why so many families choose equal without ever testing whether it's also fair.
I hope this article has offered some fresh perspectives to consider. Here are the questions I'd encourage you to sit with when planning your estate:
What legacy do I want to leave behind and how is that best supported financially and by whom?
Who are all of my beneficiaries and what are their individual circumstances?
What control do I want beyond the grave in terms of legal structures and staging?
How and when will I communicate these decisions to my family?
My final word is to reiterate the constant thread throughout this article and that is communication. The legal structures matter but none of it will land the way you intend if your family hears about it for the first time in a lawyer's office after you're gone. Have the conversation while you're still the one who can explain your reasoning, answer questions, and show your family that unequal doesn't mean unloved. That single conversation, more than any trust or clause, is what protects both your wealth and your legacy.
If you'd like help thinking this through for your own family, contact us here.
