Intergenerational Living and Estate Planning

Jul 6, 2022

As our population ages, and the majority of people live longer, it’s become common to consider intergenerational living when it comes to financial planning and, in particular, how that affects estate planning. 

The Australian Bureau of Statistics, in its 2017-2018 Household Income & Wealth Survey, reported that owner occupied dwellings were the largest asset held by households, accounting for 42% of household assets*. This means the family home is one of the most significant assets for most people and, therefore, how this asset is managed and eventually distributed should be carefully considered. 

Intergenerational financial planning considers not only the needs of the various members in each generation of the family, but also takes into consideration how these needs will change and pays particular attention to those times when there is often significant change – when you retire, when you enter aged care, and when you pass away. 

When you retire 

When calculating the age pension, Centrelink considers the family home to be exempt from the Assets Test so any decision you make to change homes can have a financial effect on the income available in retirement.  

When you enter Aged Care 

If you or your partner’s need for care increases and one of you remains in the family home while the other partner enters aged care, the family home is not counted as an asset which can help reduce the cost of care. 

When you pass away 

Planning for the distribution of your assets is vital if you want your wishes to be accurately represented and carried out upon your death. It is also important to remember that how assets are owned is really important, as not all of your assets will be part of your estate. For example, assets held jointly with your partner will generally pass to the surviving partner on death.  

The plan can become complicated for various reasons, for example, where an adult child moves back into the family home to care for older parents or if older parents move in with an adult child. If a financial payment is made – by either party – this can affect the ultimate “equal” distribution of assets (if that is what is planned). In this scenario, it is also vital to consider what the plans are for the other place of residence, along with any additional financial considerations, for example tax, insurance and cash flow. 

Intergenerational financial planning can also take into consideration the effect of an inheritance on the various beneficiaries. For example, where this changes the recipient’s asset base, this may affect their personal financial situation and their retirement planning options.  

Another major consideration is gifting, and the timing of any financial gifts parents may wish to make to their children. For Centrelink aged care purposes, there are limits on how much and how often financial gifts can be made if you don’t wish them to count as an investment. It is also important to note that a “gift” is very different to a “loan” so discussing this with an expert and having it correctly documented is an important consideration. 

As with all financial planning, we always recommend any arrangements between family members should involve each party receiving their own independent legal advice, with any agreements made being documented. 

 * Source: https://www.abs.gov.au/statistics/economy/finance/household-income-and-wealth-australia/2017-18#household-income-and-wealth 

More insights

Women & Money: Managing the Unexpected

Women & Money: Managing the Unexpected

This month we held our event "Women & Money: Managing the Unexpected" in our Sydney office. We had a diverse and experienced range of speakers which included Amanda Doring (Principal, Russell Kennedy), Amanda Trenfield (MD, Authentic Human) and Bronwen Batty...

Meet Kerri Mendl, Specialist Lifestyle and Care Financial Adviser

Meet Kerri Mendl, Specialist Lifestyle and Care Financial Adviser

Kerri Mendl joined Alteris Financial Group in 2019 and is today a key member of the Lifestyle & Care team. Kerri’s goal is to help families with a loved one who is transitioning into aged care or making plans for future care options. “Too many people don’t know...