Current at March 2024
Demographically, Australia is experiencing significant intergenerational wealth transfers and will continue to do so for some time.
In 2018, over $120 billion was transferred in inheritances or gifts. The Productivity Commission expects inheritances and gifts may increase fourfold between 2021 and 2050.
Most inheritance recipients are aged in their 50s at the time of inheriting. Older parents are increasingly looking to transfer wealth to their children while still alive.
The 'Bank of Mum and Dad' known colloquially for funding younger Australians into housing they would not otherwise be able to afford, continues to operate ensuring children are able to acquire assets they could not otherwise obtain borrowing commercially.
This also presents challenges in protecting family wealth against future relationship break ups of the younger generation. What happens when a claim is made by a child's partner or spouse against the assets gifted, or that they are assisted to buy, through family generosity?
Increasingly, parents are turning to estate and family law planning to assist them to transfer assets to their children during their lifetime. Parents want to see their children enjoy those assets, but with safeguards to ensure their generosity is protected against any future break up or court claim.
Financial Agreements are a tool available to assist people who are in a potential or current de facto relationship or marriage to set out how they would want their assets dealt with in the event they were to separate.
Third parties can be involved in the agreement itself as a guarantor or a third party payer or may insist that the gift recipient enters into a Financial Agreement as a condition of receiving a gift.
