Preparing for an inheritance

What role will an inheritance play in your long-term wealth strategy?

If the ballpark numbers are at least remotely close, the amount of assets set to be transferred from one generation to the next in Australia over the coming decades will amount to trillions of dollars.

According to estimates within a 2021 Productivity Commission report, Australians aged 60 and over will transfer $3.5 trillion or an average of about $175 billion per year in wealth in the next two decades. A 2024 report by JBWere Australia had an even higher estimate of $5.4 trillion for likely wealth transfers in Australia over the next 20 years.

The largest part of this great wealth transfer will be between members of the “Baby Boomer” generation (people born just after the end of World War II through to 1964) and their children and other heirs.

It will include family homes, investment properties, superannuation money, direct shares and a wide range of other financial and non-financial assets.

The value of inheritances is not only likely to grow dramatically as wealth levels increase but it will be an increasingly important source of future income and assets for younger generations.

Show me the money

Vanguard’s 2025 How Australia Retires research found that 21% of working-age Australians and 8% of retirees expect to use an inheritance as a source of their retirement income.

Furthermore, 13% of working-age Australians and retirees said the family home would become an inheritance for their beneficiaries or children and they planned to keep it within the family when they died.

The conversation around inheritances interweaves with Australian government research that many Australians are not exhausting their superannuation savings before they die.

The 2023 Intergenerational Report found that most retirees draw down at the legislated minimum drawdown rates.

“This results in many retirees leaving a significant proportion of their balance unspent, for example, a single retiree drawing down at the minimum rates would be expected to still have a quarter of their retirement assets at death,” the report noted.

Treasury estimates in the 2020 Retirement Income Review included projections from Treasury that outstanding superannuation death benefits could increase to just under $130 billion in 2059, assuming there’s no change in how retirees draw down their superannuation balances.

A touchy subject

Australians collectively had around $17.7 trillion in household wealth at 30 June 2025 according to Australian Bureau of Statistics data, including property and other investments, cash deposits, and superannuation.

Meanwhile, the 2025 UBS Global Wealth Report showed we ranked second in the world for median wealth per adult at US$268,424, and fifth for average wealth per adult at US$516,640.

There’s potentially a lot of household money to go around, and a lot to be inherited.

But inheritance planning, unlike succession planning within a business, is an area that’s rarely discussed at the family level.

Most families regard subjects such as death and the future division of wealth as unpleasant, and potentially sensitive when multiple heirs are involved.

But there’s a lot to be said for having open discussions within your family about the intended treatment of assets and future inheritances.

Creating a valid will, and specifically documenting how you want your assets to be managed and divided after your death, should be a key step in the inheritance planning process.

Residential real estate and superannuation, which combined make up more than three quarters of total household assets, are the largest components of most inheritances.

Ensuring that any superannuation you have left over at the time of your death is distributed according to your wishes requires you to complete a binding death benefit nomination form provided by your super fund.

Seek professional advice

It’s important to be aware of any potential tax implications. For example, while superannuation distributed to a surviving spouse or dependent children is generally tax free, non-dependents (including adult children) may be required to pay tax on amounts they receive.

Those inheriting assets such as property and financial securities may also face tax issues.

Estate planning can be complex. Speak to us about helping you and your intended beneficiaries map out an inheritance framework that also identifies issues such as potential tax liabilities is a prudent step.

Source: Vanguard November 2025

This article has been reprinted with the permission of Vanguard Investments Australia Ltd. Copyright Smart Investing™

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