Giving While Living: Preparing the Next Generation Through Early Wealth Transfer

A Shift We’re Seeing Among Families

At Morrows, we’re seeing more and more families exploring ways to pass on part of their wealth earlier, rather than waiting until their estate is distributed.

Individuals want to see the positive impact of their support while they’re still here to enjoy it, especially as children and grandchildren face challenges like rising home prices and the cost of raising young families.

Why More Families Are Choosing to “Give While Living”

Giving during your lifetime can be deeply rewarding, both financially and emotionally. We often hear from clients who want to:

• Support their children through key milestones like buying a first home, starting a business or pursuing further education
• Experience the joy of helping their loved ones achieve their goals now, rather than later
• Reduce complexity for their estate and lessen the potential for future family disputes
• Start preparing the next generation early to manage wealth responsibly

As one client put it, “It’s lovely to be able to help when it actually makes a difference and still be around to share in the excitement and see the positive impact it makes on my children and grandchildren’s lives.”

Important Considerations Before You Start Gift Giving

While gift giving can be rewarding for both parties, it’s essential to plan carefully. Some key considerations include:

• Your own financial security – Ensure any gifting won’t compromise your retirement or future aged care needs
• Fairness between family members – Clear communication can reduce the risk of future disputes
• Relationship risks – If your child later separates, a gift might be considered part of marital property
• Centrelink gifting rules – For age pensioners, gifts over $10,000 in a year or $30,000 over five years can affect entitlements
• Tax implications – While there’s no gift tax in Australia, transferring certain assets can trigger CGT.

The Tax Trap of Waiting Until After You’re Gone

While Australia doesn’t have a formal inheritance or death tax, passing assets on after death can still create significant tax consequences that many families don’t anticipate.

• Capital Gains Tax (CGT): When your children inherit assets such as property, shares or a family business, they may later face CGT on the growth in value from the time you first acquired the asset. If the asset has grown substantially, this can result in a substantial tax bill when it is eventually sold.
• Superannuation Death Benefits Tax: Super left to non-tax dependants (like adult children) can be taxed at up to 17% on the taxable component. For large balances, this can mean hundreds of thousands of dollars going to the ATO rather than your family.
• Division 296 considerations: The new proposed legislation of Division 296 is looking to impose an additional 15% tax on earnings on total super balances over $3 million, which is prompting many families to consider gradually reducing large super balances and transferring wealth earlier.

By planning ahead and passing on some wealth during your lifetime, you may be able to reduce the overall tax burden on your estate while also helping your children when they need it most.

Thoughtful Structuring

Rather than handing over cash outright, many families are using structured strategies to provide support while still maintaining some control. These can include:

• Family trusts – To protect assets and preserve flexibility
• Formal loan agreements – To document the intent and protect funds in family law situations
• Investment bonds – A flexible and tax-effective structure that can be transferred at a chosen time or age. Earnings are generally taxed at a maximum rate of 30%, and withdrawals are usually tax-free after 10 years. Investment bonds can also include rules around when and how funds can be accessed. Read more on this here.

These strategies can help safeguard the funds, reduce risk, maximise the assets and create peace of mind that your support will be used as intended.

Helping the Next Generation Step Confidently Into Wealth

Passing on wealth early is about more than money; it’s also about preparing and educating the next generation to manage it well. We encourage you to:

• Involve your children in financial discussions and planning
• Introduce them to your trusted advisors
• Talk about family values and the purpose behind the wealth

This can make the transfer process much smoother and help ensure your legacy lasts for generations to come.

How Morrows Can Support You and Your Loved Ones

There’s no single right way to approach gift giving. What’s important is finding a path that aligns with your values and protects your long-term plans.

Our Morrows Private Wealth team can help you:

• Model the impact of gifting on your future plans
• Structure transfers to protect your wealth from risks and tax implications
• Prepare tailored financial plans and investment strategies to help grow the wealth
• Support your children or grandchildren as they learn to manage wealth responsibly

With the proper planning, you can help your family today, without jeopardising your own tomorrow.

If you’re thinking about helping your children or grandchildren, speak with your Morrows advisor to explore your options and develop a strategy that works for you and your family.