An interesting article in the Australian Financial Review (23/7/11) talks about how wealth will be transferred from the Estates of baby boomers to the younger generation coming up behind them.

Baby boomers (the first of whom turned 65 this year), currently own 55% of the country’s private wealth (estimated to be well over $1 trillion) and how they go about transferring that wealth will be a big deal.  

The message here is the importance of ensuring that wealth transfer is done in a way that best meets the baby boomer’s objectives and the needs of their beneficiaries……and in a way that preserves that wealth as much as possible.

And that getting good advice is paramount. To quote from the article… “In most cases an inheritance involves cash, (the) family home, shares and property. With the exception of cash, there may be tax implications, depending on when the assets were originally bought and when and if they are sold. Tax in relation to inheritance is important – and even more so after a new ruling that could mean heirs get six-figure tax bills if they inherit super.”

The article  highlights:

  • that the main residence of a deceased person can be sold tax free – but not so if it’s not done within 2 years of that person’s death.
  • that an estate is usually given up to 3 years to finalise its administration and that there are legal and tax consequences if things aren’t wound up by then.
  • think about how to deal with shares. Some beneficiaries may like to hold on to those shares but there may be unintended negative tax consequences in doing so. As the article points out….”it may be better to sell the shares within the estate and then buy them back in your own name”.

Some key points to consider then are:

  • have a well structured and properly executed Will in place,
  • using a Testamentary Trust to distribute assets and/or the income generated by those assets,
  • nominating an Enduring Power of Attorney,
  • nominating a beneficiary to receive the death benefits from a super fund,
  • get professional advice (it can be worth it’s weight in gold !!)