Major questions have been raised about whether you should help out your struggling kids now or wait until you die. But with a cost-of-living crisis affecting millions across the country, that conundrum has only become harder to decide.
Adam Lubofsky, CEO of online will creation service Safewill, told Yahoo Finance that many older Australians feel pressured to give to their kids but are also trying to ensure they have enough cash to enjoy retirement. The topic of inheritance is a touchy topic, however, Lubofsky said it’s better to lay it all on the table so that expectations can be set.
“The last thing that you want is a surprise when it comes to estate planning, that’s when you tend to have conflict,” he said.
“It’s when you tend to have legal disputes, it’s when people aren’t aware of what an estate plan is, and they get surfaced and people become upset.”
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‘What the f**k?’: Millennial family’s shocking discovery
With an unfounded generational wealth transfer underway, individual cases are not hard to come by.
A millennial couple with two children recently disclosed that they have spent close to two decades slowly levelling up their careers. They live in an area with a high cost of living.
“We scraped and suffered to buy a small house and two used larger cars for our family,” he wrote.
“Our credit suffered. I’m personally in $20k+ of [credit card] debt that I am slowly working down. Our kids attend daycare that bled our savings dry.”
But he discovered that his father-in-law had a whopping $10 million in savings and assets.
Not long after, he found out that his own father was sitting on a fund not too far behind that.
“LITERALLY WHAT THE F**K,” the man in his late 30s said.
“I would give my last dollar to my son to make sure he was more comfortable. To make sure he didn’t suffer debt or bad credit as long as he was working.
“Here are our own f**king parents sitting on their piles of gold watching us navigate a new level of f**ked up economics and shopping for discounts and raising our children in sup-par school districts and for fucking WHAT?”
He added: “I don’t feel like I deserve anything. I just don’t know why our parents aren’t treating us the way that I would treat and take care of my own children.”
Should you help out or let them find their own way?
Many were divided on whether the grandparents should get involved and help their struggling kids or not.
“Boomers benefitted from the greatest economic period in history and attribute all of their success to their own smarts/hard work and wisdom, none of which they really have,” said one person. “They’re selfish and probably the first and only generation to not care whether their children end up better than they did.”
“My parents don’t have much, but anytime me or my sister needed help, they without hesitation did what they could to help us,” added another.
“I would never ask my parents for s**t. They always ask me if I need anything but a long time ago I learned that question was 100 per cent a ruse that allows them to sleep at night,” wrote a third.
Another commented: “It’s crazy entitled to expect your parents to give you money. Even if you would give your money to your son. My dad kicked me out when I was 21 because it was ‘time’…but I don’t hold it against my dad. They just have different morals than us.”
While some parents might want to help out, others might be more inclined to jump on the emerging Spending the Kids’ Inheritance (SKI) trend.
Baby Boomers are expected to provide the largest intergenerational wealth transfer in Australia’s history, with the Productivity Commission predicting roughly $3.5 trillion will be handed down to generations below Boomers when they die.
But the big question remains: when is it best for that money or assets to be given?
Benefits to an early inheritance
Lubofsky told Yahoo Finance that an early inheritance, also called a living inheritance, can be massively beneficial to those who need it when they’re struggling rather than when they’re older and more established.
“I think young Australians struggle with purchasing a first home, starting a family, school fees, and that’s where older Australians really want to be able to lean in,” he said.
“The trend around a living inheritance is exactly to address that.
“You have Australians who are in their 30s and 40s, who might be struggling financially, and who know that in 15 to 20 years, they’ll be inheriting a decent estate.
“And the concept around living inheritance is being able to ease the cost of pressures today for younger Australian families, rather than leaving them an estate or a gift when they don’t necessarily need it as much.”
But he also cautioned that there is a very big difference between having cash in the bank versus assets when assessing what you can give your kids. You can quite easily gift money, but things like property can come with hefty transfer fees.
Recent Finder data found one-third of Australians are expecting to receive an inheritance.
Interestingly, two in five respondents, equivalent to 8.3 million people, admit they would rather have it as a gift while the family member is still alive instead of waiting until they die.
“An early inheritance lets the parent see their children or grandchildren enjoying the gift, and the financial windfall at a younger age gives them more opportunity to use it towards something that drastically improves their life, like a deposit on a home or investing it in education,” Finder’s personal finance expert and Yahoo Finance contributor Sarah Megginson said.
“It’s not a decision that should be made without some serious consideration of your future financial needs and also the tax impacts.”
According to Finder, 10 per cent of Aussies reckon they will get an inheritance within the next 10 years, while another 13 per cent believe it will be up to 20 years before they get a chunk of change.
Major risks of giving your children an early inheritance
While it would no doubt help alleviate some of life’s biggest problems by getting an inheritance from your parents in your 20s, 30s, or 40s, it can impact their retirement.
A recent report from Australian Seniors found older Aussies feel like they’re stuck between a rock and a hard place when it comes to inheritance.
Nearly seven in 10 parents over 50 admitted to feeling pressured to provide for their children’s future, with a staggering 74 per cent citing the rising cost of living as a major obstacle to leaving a meaningful inheritance.
Nearly a third of respondents also felt guilty about not leaving much inheritance for their loved ones, which is a huge jump from the 17 per cent recorded in 2018.
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Lubofsky told Yahoo Finance you should only hand down your money or assets if you’re in a comfortable position.
“To leave a living inheritance you need to have confidence that you’re going to be able to continue living for another 10 to 30 years, whatever it might be,” he said.
“So for Australians who have that economic security, we’re seeing a big increase in the number of living inheritances that are left.
“But equally, people are living longer, and the cost of living is going up.”
According to the Association of Superannuation Funds of Australia (ASFA), a single person needs to have at least $52,085 per year to enjoy their twilight years if they own their own home, while a person in a couple requires at least $73,337.
But for those who don’t own the home they’re living in, their retirement situation can be very different.
“This is especially true for many older Australians without savings or who are at the mercy of an unforgiving rental market, who have described to us their experience of hardship and uncertainty as ‘existing’, ‘surviving’, ‘helpless’, and ‘hopeless’,” National Seniors Australia chief executive officer Chris Grice explained toYahoo Finance.
