Will all your hard work be lost?
Whether most realise it or not, acquiring wealth is a key driver for most Australians. It might come in the guise of “I want that house”, or “I want to travel the world when I retire” or even just the desire to ensure your kids are taken care of financially.
The majority of intergenerational wealth transfers fail because no preparation of the successors took place. Photo: Jessica Shapiro
The reality of building wealth is that you also “can’t take it with you when you die”. It’s a pretty common saying, so we should all be reasonably aware that whatever wealth we accumulate in our lives needs to be handed over to someone at some point.
It’s surprising though, that so many Australians have no clear plan for passing on their personal or business wealth.
Family-owned businesses comprise 87 per cent of businesses in Australia, according to the Australian Bureau of Statistics (ABS), yet a study by Family Business Australia (FBA) indicates that only 20 per cent have a succession plan in place.
In addition, a study published by Forbes found that 70 per cent of intergenerational wealth transfers fail because no preparation of the successors was taking place.
So, how can you ensure that your wealth will survive past your generation? Here are five handy hints.
Talk to your kids
This is particularly important if you are passing your wealth on to more than one beneficiary.
Discuss what their expectations are in an open forum so that you can address any issues as a group. You may find this will help with dividing your estate, and at the very least, it will bring to light potential issues before they get out of hand.
Give them an understanding of how to accumulate wealth in the first place
If you aren’t adequately prepared, receiving a large inheritance can be a bit like winning the lottery, and we’ve all seen stories of lottery winners unaccustomed to wealth quickly blowing their winnings.
By incorporating financial management into everyday life from an early age, you will ensure your children know the value of money – rather than thinking there is an endless supply to buy anything they want.
Find out what they are interested in
Inheriting something you have no interest in is a good way to ensure that inheritance is lost or at the very least neglected. By maintaining an understanding of their interests, as they get older, you can start to devise ways to tailor your estate to suit.
Get them involved
This is relatively common in the case of a family business, but even in cases where you can’t get your kids involved with your work, you can still get them involved in managing the family’s wealth.
Find out what they are good at
Having gotten your children involved, you can then see their aptitude for the task at hand. Just because someone wants to be a successful entrepreneur doesn’t mean they should be in charge of the family’s wealth.
Following these five handy hints may require a few hard conversations at some point, but it will dramatically increase the likelihood of long-term success for your succession plan.
Why not increase the financial savviness of those around you – pay it forward and pass on these tips to your family, friends and kids.
Olivia Maragna is the co-founder of Aspire Retire Financial Services and is a respected and independent financial expert. Olivia’s advice is general in nature and readers should seek their own professional advice before making any financial decisions.