How to have empowering wealth conversations across generations

“I just don’t want to sound like I’m some sort of gold digger” asserted my friend as we completed another caffeine fueled lap of the park. We were dissecting the rather sensitive issue that is opening a conversation about estate planning and inheritances with your elderly parents. Her parents are noticeably beginning to age and she wanted to open a conversation not just about what they want to happen with their wealth when they pass on but also around their wishes as they navigate old age and deteriorating independence. Australia is about to experience its largest intergenerational wealth transfer – $3.5 trillion in the next two decades (McCrindle Research). By 2050, Baby Boomers are expected to trillions of dollars in inheritances to Millennials and Gen Z. But money is still a taboo topic of conversation in many families leaving individuals in the dark and anxious about this pending event. Nevertheless, it is indeed possible to skillfully navigate these conversions with grace and respect, fostering a harmonious understanding between generations.

In the coming years, an extraordinary amount of wealth is expected to pass from the older generations (notably Baby Boomers) to their children and grandchildren. A wealth transfer is the transfer of wealth from one person to another, such as when a husband dies and his estate passes to his wife. Intergenerational wealth transfer is wealth passed from one generation to the next: Father to daughter, grandmother to grandson or aunt to niece etc. Thanks to unprecedented economic prosperity, free university education and relatively peaceful times the Baby Boomer generation in particular have been able to accumulate an extraordinary amount of wealth over their lifetime. Whilst Australian Baby Boomers make up 25% of the population they control over half (53%) of the nation’s wealth according to McCrindle Research. This wealth will predominantly transfer in the form of property assets, superannuation, cash and shares.

Discussing wealth transfer plans is important. If done well this can provide financial security for next generations, family legacy can be preserved, and generational prosperity can be achieved. If done poorly it can lead to heartbreaking family conflict, financial mismanagement, unmet expectations as well as legal and tax consequences. Furthermore the responsibility of managing inherited wealth falls upon the younger generation, who may or may not possess the financial literacy and experience required to make prudent decisions with this wealth. Without careful financial planning, mismanagement or unpreparedness can lead to the erosion of wealth, causing long-term consequences for families.

Ideally, the older generation would be openly discussing this pending event, proactively planning the transfer with the assistance of trusted advisors as well as encouraging financial education amongst those on the receiving end of this wealth transfer. The reality, however, is often quite the opposite with many individuals choosing not to discuss their estate planning with their children due to reasons such as privacy, wanting to avoid conflict or discomfort, concerns about dependency or entitlement from their children, uncertainty in plans, cultural or generational norms, or a simple lack of awareness or knowledge driving the decision.

Whilst you should never force a family member to discuss their estate planning with you, there are steps you can take to encourage a conversation in a way that is respectful and graceful.

1. Choose the right time and place: Find a suitable and comfortable environment where everyone can focus and engage in an uninterrupted conversation. Select a time when everyone is calm and receptive to the conversation.
2. Approach the topic with empathy and respect: Begin the conversation by expressing your genuine concern for their well-being and the desire to ensure their wishes are honoured. Emphasise that your intention is to have a productive discussion that aligns with their goals and values.
3. Active listening: Give your parents the opportunity to express their thoughts and concerns. Practise active listening by paying close attention, maintaining eye contact, and showing empathy. This helps foster trust and ensures their perspectives are heard and acknowledged.
4. Prioritise relationships over assets: Emphasise that the purpose of the conversation is to preserve and strengthen family relationships rather than solely focusing on the distribution of assets. Reinforce the importance of open communication and understanding among family members.
5. Share information and resources: Offer to provide educational materials or resources on estate planning and inheritance, such as articles or books, to help facilitate a shared understanding. This can help alleviate concerns and promote a more informed discussion.
6. Involve professional guidance: Suggest involving professional advisors, such as estate planning lawyers or financial planners, to provide expert guidance and advice. Their presence can lend credibility, expertise, and facilitate a more objective conversation.
7. Discuss long-term goals and values: Explore the family's long-term goals and values related to wealth and inheritance. Encourage an open dialogue on how they wish to leave a legacy, support charitable causes, or provide for future generations. Understanding their intentions can help align everyone's perspectives.
8. Seek compromises and find common ground: If there are differing opinions or conflicts, strive to find compromises and common ground that address everyone's concerns and interests. Focus on the shared objectives of maintaining family harmony and ensuring fairness.
9. Document decisions: Once agreements are reached, encourage your parents to document their wishes through legal means, such as wills, trusts, or power of attorney documents. This ensures clarity and provides a legally binding framework for future actions.
10. Follow up and reassess periodically: Estate planning is an ongoing process. Regularly revisit and reassess the plans, taking into account any changes in circumstances or family dynamics. This demonstrates a commitment to maintaining open communication and adapting to evolving needs.

Keep in mind that each family is unique and your individual dynamics may vary. Adapt these strategies to suit your specific situation, always prioritising respectful and open communication to foster understanding and harmony.

Discussing estate planning, inheritance, and intergenerational wealth transfers with elderly parents is a sensitive yet crucial conversation that many individuals tend to avoid. However, with the impending intergenerational wealth transfer and the potential consequences of inadequate planning, it becomes essential to approach these discussions with grace, respect, and proactive strategies. By creating a supportive environment, actively listening, involving professional guidance, and emphasising long-term goals and values, families can foster understanding and alignment. Encouraging open dialogue, documenting decisions, and periodically reassessing plans ensures that family relationships are preserved, legacies are honoured, and future generations can navigate inherited wealth responsibly. By breaking the taboo around discussing these topics and prioritising healthy communication, families can achieve a harmonious understanding that sets the stage for long-term financial well-being and generational prosperity.