Studies have shown that inheritances in Australia are not only large, but growing. For example, a sampling of estates from Victoria’s probate office suggests the median Victorian estate is worth around $500,000 – which is likely to be the same nationwide. Some, however, are even larger, with around 20% worth more than $1 million and 7% worth more than $2 million. Property is the largest component of estates, accounting for about half of the average value.
Inheritances on the rise
The main beneficiaries of ‘final estates’ (estates without a surviving spouse) are children who receive about 75% of all inheritance money. Other family members, such as nieces, nephews and grandchildren receive about 20%. Friends receive about 4% and charities 2%. Average inheritances are growing by about 2 percentage points above inflation every year which is significantly faster than wages or gross domestic product.
So what is causing the growth? It seems that net wealth has been growing steadily amongst older households. Today, households run by people aged 75 and over have an average of $1 million in assets, whilst in 1994, households run by individuals in the same age group had assets of only $400,000 and up.
Research has shown Australians tend to spend less after they retire and even less as they progress into old age. Many retirees are also net savers, which means almost all of their accumulated property and superannuation wealth is passed on to their children.
Furthermore, with the current trend in longer life expectancy, the trend in Australia shows inheritances are not often passed on to young adults. More than 80% of money passed down from parents goes to adult children aged 50 or over. And as life expectancy continues to grow, inheritances will continue to supplement retirement savings rather than help young people start families or buy a house.
It has also been documented that wealthier people receive larger inheritances. The wealthiest 20% of Australians receive 38% of inheritance money and the poorest 20% receive only 8%. This indicates that the growing wealth of baby boomers is likely to end up concentrated in the hands of a select group of Gen Xers and millennials who will be able to enjoy better schooling, better housing and the ability to take greater financial risks.
Have questions about inheritances and Wills? Contact the experienced team at Gerard Malouf & Partners Compensation, Medical Negligence & Will Dispute Lawyers today for a free consultation.