Australia is on the cusp of the most monumental economic shift in the country’s history: the Great Wealth Transfer. Over the next two decades, an estimated $3.5 trillion will pass from Baby Boomers to younger generations, primarily Millennials and Gen X. This is much more than a financial transaction. Because of its scale, it’s a societal transformation that will reshape how we think about wealth, inheritance, and legacy.
Sarah Corbette, a spokeswoman from budgetcremation.com.au, an online service offering affordable cremation services, said, “I believe that understanding the implications of this transfer is crucial for all Australians, whether you’re planning to leave a legacy or expecting to receive one.”
Scale and significance of the wealth transfer
The sheer scale of this wealth transfer is unprecedented. Decades of property market growth and superannuation accumulation have created a significant pool of assets. However, this transfer won’t be a simple handover.
It comes with complexities, emotional upheavals, and the potential for both opportunity and conflict if not managed thoughtfully. Worryingly, it’s estimated that “70 per cent of families will lose inherited wealth by the second generation, and 90 per cent by the third” (Grant Thornton, 2024), highlighting the critical need for preparedness.
Impact on younger generations’ financial planning
One of the biggest changes we’ll see is a shift in how younger generations approach financial planning. Many Millennials and Gen Xers are already grappling with housing affordability and the rising cost of living.
An inheritance could significantly alter their financial landscape, provide opportunities for homeownership, investment, or starting a business, and reduce debt. However, it also brings the responsibility of managing newfound wealth wisely.
Financial literacy and access to sound advice will be more critical than ever.
As pointed out by Corbette, “a key aspect of this wealth transfer is the importance of clear and early communication within families. Conversations about estate planning, Wills, and end-of-life wishes are essential to ensure a smooth transition of assets and to prevent misunderstandings or disputes among beneficiaries.”
Increasing awareness of the Great Wealth Transfer will likely bring these conversations to the forefront, allowing families to openly engage will better equip them to navigate this period with harmony and respect for the wishes of their loved ones.
Blended families, multiple marriages, and de facto relationships are more common now than in previous generations. This means Wills and estate plans need to be meticulously drafted to reflect these diverse family structures and to ensure assets are distributed as intended.
The role of legal professionals specialising in estate law will become even more vital in helping individuals create robust plans that stand up to scrutiny and accurately reflect their intentions. Grant Thornton notes that the impacts of divorce, death, multiple marriages, and the inevitable blended families make protecting and building family wealth more complicated, but more essential to navigate professionally.
The importance of superannuation in Australia
Superannuation plays a central role in this. For many Baby Boomers, their superannuation is one of their largest assets. Understanding the rules around superannuation death benefits, how they are taxed and who can receive them is crucial. Nominating beneficiaries for your super, whether binding or non-binding, is a key part of ensuring these funds go to the right people.
People are unaware of the implications of superannuation, therefore discussing the process with families is vital when planning for the future.
One upside is how the Great Wealth Transfer may also fuel philanthropic endeavours. As wealth changes hands, there’s an opportunity for a portion of it to be directed towards charitable causes.
Many individuals are passionate about giving back to their communities, and a well-structured estate plan can facilitate this, creating a lasting legacy that extends beyond the family.
