How much money should you give away now?

Jun 6, 2023

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Some people plan to give money to beneficiaries (typically children and/or charities) before they pass away, especially if they consider they have more than enough money i.e., surplus wealth. Often, their thesis is that their kids can make good use of the money now, whilst they are younger, rather than waiting another couple of decades. By that time, they’ll probably already be financially established.

I discuss what you must consider before making an early inherence.

Inheritance tsunami

I’ve stated before that the amount of inheritance (mainly from the baby boomer generation) that is likely to be passed on will increase fourfold over the next three decades. Approximately, $3.5 trillion will be bequeathed over the next decade to reach $224 billion per year by 2050! That’s huge.

However, according to ANZ Private Bank’s research, approximately 70% of intergenerational wealth transfers fail because of family conflicts and other problems. The best way to avoid many of these problems is to gift wealth prior to death.

Inheritances are often received too late in life

Typically, by the time both parents have passed away, most people are already (financially) well established. They have worked hard to pay for the costs of raising a family, repaying a home loan, investing in super and other assets. Receiving an inherence will only make an already strong financial position, even stronger.

Arguably, and putting aside that I think a bit of ‘financial struggle’ is beneficial and necessary, it would be more useful for people to receive inherences earlier in life. It would help them upgrade their home sooner (and maybe get into a good public-school zone) and invest sooner, thereby benefiting from compounding capital growth.

It’s possible that future generations could continue to benefit from early inherence if your children agree to repeating the practice. That is; I’m going to give you an early inherence on the understanding that you will make smart financial decisions, which hopefully puts you in the position of being able to do the same for your children. Of course, nothing is guaranteed especially when gifting monies.

Avoiding family disputes

Most family disputes can be avoided with clear, regular and forthright communication. If all beneficiaries know what their entitlements will be (when you die), a dispute is less likely. However, the best way to avoid disputes is to gift monies whilst you are alive – as you can ma

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