Generational wealth: how to build and preserve family assets in Australia

Most families don’t lose wealth because of bad investments. They lose it in the handover.

No plan for how it passes on. Super paid out with tax that could have been avoided. Kids who inherit money but never learned how to manage it.

Generational wealth is what you build that keeps working after you. Here’s how I help tech executives build it, and keep it in the family. This is general information only.

Start with your own retirement

It sounds backwards, but the best gift to your kids is a retirement you can fully fund yourself.

If you need their help later, or you have to sell assets early, there’s nothing left to pass on. So I always secure your retirement income first, usually $15K to $25K a month for my clients. How much money will you need to retire comfortably?

6 ways to build and protect generational wealth

1. Own assets that compound for decades

Wealth that passes between generations needs time. Quality shares and well located property have historically grown over the long term.

Using the rule of 72, an asset growing at 7% a year doubles about every 10 years. Over 30 years, that’s 8 times. That’s the power you’re passing on.

2. Plan the kids’ help on purpose

Most parents want to help their kids into their first home. Plan it, don’t wing it.

One tech VP I work with set aside $500K in today’s dollars as a home deposit for each child at 25. It’s built into his plan, alongside $25K a month for his own retirement. Read his case study.

Lending money to your kids, rather than gifting it, can also help protect it if their relationship breaks down. Get legal advice on how to document it.

3. Use a testamentary trust in your will

A testamentary trust is created by your will when you die. Your kids can control the assets without owning them personally.

It can help protect an inheritance from divorce, creditors and bad decisions. Income paid to grandchildren under 18 from a testamentary trust may also be taxed at adult rates, which can save a lot of tax.

4. Get your super nominations right

Super doesn’t automatically follow your will. Without a valid binding nomination, the trustee decides who gets it.

Also, super paid to adult children can be taxed at up to 17% on the taxable part. On a $2M balance, that can be a big bill. There are ways to reduce it, like a recontribution strategy after 60, so plan it early.

5. Consider a family trust for investments

A family trust can hold investments for the whole family. It gives flexibility over who is taxed on the income each year, and the trust can continue across generations.

It has set up and running costs, so it needs to suit your situation.

6. Teach the next generation

The biggest risk to generational wealth is a generation that doesn’t understand money.

Talk to your kids about how money works. Show them the plan when they’re old enough. Most of what we know about money we learned at home, good and bad. What is your financial thermostat set for?

The mistakes I see most

• No will, or a will that’s 10+ years old.
• Super nominations that lapsed or were never made.
• Everything in one company’s stock, with no plan to diversify.
• Big gifts to kids with no protection.
• No one in the family knows where anything is.

Who I do this for

My clients are tech executives and sales leaders, aged 40+, earning $400K+ with RSUs or big commissions. Most have at least $500K in super and $1M of equity in their home, and can save at least $4,000 a month above their minimum mortgage repayments.

If that’s you, the plan for your kids should be part of your plan, not an afterthought.