When Should You Pass On Your Wealth

With people living longer than ever, many are considering passing on some of their assets to loved ones during their lifetime. While this can have its benefits, it's essential to weigh the pros and cons to determine whether it's the right choice for you.

The Benefits of Passing on Wealth While You’re Alive

Giving your family a helping hand while you're still around to see them enjoy it can be incredibly rewarding. Whether it’s helping your children or grandchildren buy a home, start a family, or achieve other life goals, passing on some of your wealth while you’re alive allows you to witness the positive impact it has on their lives.

Some families choose to provide financial assistance as a loan with the understanding that it will be forgiven upon death. When done formally with a deed of loan, this approach can protect the money from creditors and ensure it doesn’t become part of divisible assets if your child ever faces divorce.

The Drawbacks of Gifting During Your Lifetime

However, there are some significant downsides to consider. One of the biggest concerns is the potential impact on your social security benefits. Under current rules, you can give away up to $10,000 in assets each year (and $30,000 over five years) without affecting your pension. Anything above these limits will count towards the Age Pension assets test.

Another important consideration is your own future needs. Your retirement could last 30 years or more, and you’ll need to ensure you have enough savings and income to support your lifestyle. The cost of aged care is another factor that many people underestimate. High-quality care can be expensive, and if one spouse remains at home, it can strain your financial resources if you lack sufficient liquid assets.

Passing on Wealth Through a Will

If the idea of gifting assets during your lifetime seems too complicated or risky, passing on your wealth via a Will might be a simpler option. With a Will, you can appoint a trusted executor to ensure your assets are distributed according to your wishes.

One potential advantage is that your heirs may face fewer tax obligations. For instance, if you plan to leave the family home to your children, they may be eligible for a full capital gains tax (CGT) exemption if they sell it within two years of your passing, provided the property was your primary residence and not used to generate income.

Potential Issues with Wills

However, even with a well-drafted Will, disputes among beneficiaries—or others who feel they’ve been left out—can arise, and you won’t be around to help resolve these conflicts. To minimise the risk of disputes, you might consider setting up a testamentary trust, reducing the size of your estate by gifting certain assets during your lifetime, or providing a statement of wishes along with your Will. While not legally binding, a statement of wishes can help your loved ones understand the reasons behind your decisions.

It’s also crucial to review your Will regularly to ensure it still reflects your intentions, especially after significant life events like a birth, death, divorce, or remarriage. Keeping your executor informed can prevent surprises when it’s time for them to carry out your final wishes.

For personalised advice tailored to your circumstances, it’s wise to consult a qualified financial adviser or estate planning lawyer. And if you’re considering passing on assets during your lifetime, be sure to fully understand the consequences and ensure that your decisions align with your values and goals.

Book a complimentary call with the Life Sumo Team to get personalised advice for you. 

This provides general educational information only. The content does not take into account your personal objectives, financial situation, or needs. You should consider taking financial advice tailored to your personal circumstances. Life Sumo (Orion Enterprises (Cairns) Pty Ltd) has representatives that are authorized to provide personal financial advice.