Opinion
You’re not entitled to an inheritance, so here’s how to ask about it
Victoria Devine
Money columnistBoomers are set to leave behind $224 billion of inheritance each year between now and 2050, in large part thanks to Australians accumulating more wealth in recent decades. According to the Productivity Commission, that figure is more than double what it was in 2002, and over the past 20 years, almost $1.4 trillion has been passed on via inheritances.
While this scenario may seem like a nice problem for those on the receiving end to have, the truth is I wouldn’t wish an inheritance on anyone.
The truth is, I wouldn’t wish an inheritance on anyone, but as generations get older, it’s a tough conversation many of us are having.Credit: Dionne Gain.
If you’re receiving a lump sum of money, it means someone you loved is no longer with you. And even though it’s a huge privilege to inherit wealth – be it a couple of thousand dollars or well into the hundreds of thousands, there are countless complicated feelings that can come with that.
For better or worse, we’re living through an era of intergenerational wealth transfers like we’ve never seen before. Billion and trillion dollar topline figures aside, the Productivity Commission also shows that the average inheritance is around $125,000, with the average recipient aged 50 years old.
At the same time, new research from CommBank iQ shows Australians aged over 65 (ahem, Boomers) are currently spending more money than any other cohort of the population.
The data reveals over 65s have increased their spending in areas that relate to the cost of living (insurance, utilities and groceries) like the rest of us, while at the same time increasing their spending on travel (up 10 per cent) and dining out (up 7 per cent) – the second year of noticeable spending increases for this demographic.
If there’s one thing people feel more awkward talking about than money, it’s a death that hasn’t happened yet.
The dark side to this idea we seem to have of Boomers living large while the rest of us struggle is a troubling rise in what the NSW Ageing and Disability Commissioner Robert Fitzgerald referred to as an emerging phenomenon of “inheritance impatience”.
Speaking at budget estimates, Fitzgerald explained that on account of us living longer, “Our children – my children – will have to wait much longer for the wealth transfer to occur, and that wealth transfer is being pushed out by five to 10 years … what we know about adult children is they are not patient, so inheritance impatience will, in fact, grow.”
As I was saying earlier, complicated feelings.
So what do you do if you’re seeing your parents or grandparents living large on European holidays while you’re struggling to make ends meet and keep a roof over your family’s head? Unfortunately, there’s no simple solution or one-size-fits-all approach when it comes to inheritances.
On their own, families and money can be complicated things. Throw them together and you’ve got the plot line to many a Hollywood classic.
The first thing to remember is, and I cannot stress this enough, you’re not entitled to an inheritance.
You might feel that you are with every ounce of your being. You might read stories of rich celebrities declaring they’re not leaving their kids a cent and thinking they’re monsters. You might genuinely believe a lump sum of cash will heal the fractured or imperfect relationship you had with the loved one in question.
But as someone who has done a lot of work around wills and estate planning, I can tell you this: you are not inherently entitled to someone else’s money simply because you’re related to them.
Last month, home deposits reached record levels at more than 32 per cent, with buyers using more cash and showing less reliance on the banks. Considering the average age of home buyers in Australia is 36 (a full 14 years younger than the average age of an inheritance recipient) this suggests a lot older Australians are now choosing to transfer their wealth – either partially or entirely – to their loved ones while they’re still living.
But for those not in this position, having a conversation about a loved one’s financial plan once they’re gone, or what you’re able to expect, can feel fraught. If there’s one thing people feel more awkward talking about than money, it’s a death that hasn’t happened yet.
From experience, the best way to phrase these conversations is not in the future, but in the past. Instead of using hypotheticals like “what if you died tomorrow?” which feels slightly ominous and can give the impression you’re ready and waiting for your assumed pay day, try saying something like, “what if you had died yesterday? Is there a plan in place, and if so, who do we contact should anything happen?”
It’s rare to know exactly what’s in a will, and how a person has decided to carve up their assets, until they have passed away. There’s also the fact that one person’s priorities or desires for their legacy may not align with another’s.
A few years ago, I heard of a woman leaving 90 per cent of her wealth to the Lost Dogs Home and the remaining 10 per cent to her children. While her children likely felt entitled to more due to their relationship to her and were surprised to learn of her donation, the woman clearly felt her values aligned more with a not-for-profit organisation, as was her right.
When that day does ultimately come, you may find that there is less than you were expecting - perhaps your loved one stayed in five-star hotels and flew first class on those European holidays (good for them, I say!). Perhaps there will be more.
Either way, that day signals the loss of someone who played a significant role in your life, and ultimately, a sum of money may help you financially, but it’s only there because they’re not. As I said, complicated feelings.
Victoria Devine is an award-winning retired financial adviser, best-selling author and host of Australia’s No.1 finance podcast, She’s on the Money. Victoria is also the founder and director of Zella Money.
- Advice given in this article is general in nature and not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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