Generational wealth refers to assets passed down from one generation to the next. With rising costs of living, growing economic uncertainty, and the desire to create a meaningful legacy, families are becoming more intentional about how they build and pass on wealth across generations.
Here’s what you need to know.
What Is Generational Wealth?
As mentioned previously, generational wealth refers to assets passed down from one generation to the next. It can include:
- Property and real estate
- Investment portfolios (shares, bonds, managed funds)
- Cash savings
- Superannuation or retirement accounts
- Businesses
- Life insurance proceeds
- Family trusts or estate assets
The goal isn’t just to accumulate wealth — it’s to preserve and grow it so future generations can benefit from it too.
Why Is Generational Wealth Important?
Generational wealth allows families to:
- Provide better education and opportunities for their children
- Break cycles of financial hardship
- Create a financial safety net
- Leave a lasting legacy
- Reduce the financial burden on future generations
It’s also about giving your family choices and freedom — whether that’s the choice to pursue a business, avoid debt, take a holiday or take time off to care for family.
How to Build Generational Wealth
Creating generational wealth doesn’t happen overnight. It requires strategy, discipline, and long-term thinking.
1. Invest Early and Wisely
Investing in appreciating assets (like shares or property) allows your money to grow over time through compound interest, compounding growth and capital gains.
2. Buy Real Estate
Property has historically been a reliable long-term wealth builder in Australia. Owning the family home — and perhaps a second or third investment property — can create solid equity to pass on. As Australia’s population increases and the supply of property cannot keep up, property is expected to increase in value over time.
3. Start or Grow a Family Business
Businesses can be powerful vehicles for wealth generation — especially if they’re scalable or positioned to be sold at a profit. Using a competent and professional accountant Melbourne can help ensure that your business can remain profitable, while minimising tax and maximising it’s value.
4. Use Family Trusts
A well-structured family trust can provide asset protection, tax advantages, and flexible income distribution across generations. Using an accountant Melbourne, like Nobel Thomas, can assist with family trust establishment and maintenance.
5. Have a Solid Estate Plan
Wills, powers of attorney, binding nominations, and trust structures are essential to ensure assets are transferred smoothly and tax-effectively when the time comes. Do not hesitate to contact a business accountant for further information.
How to Protect It
- Create a Will and Estate Plan
A clear estate plan helps avoid family disputes, delays in distributions, and unwanted tax consequences. A business accountant, like Nobel Thomas, can help ensure the establishment of an effective estate plan.
- Use Asset Protection Strategies
Separate personal and business assets, consider corporate structures, and use legal tools like trusts and insurance to shield wealth from potential creditors and liabilities. Again, do not hesitate to consult an accountant Melbourne to ensure the most protective structures are utilised.
- Educate the Next Generation
Financial literacy is critical. Teaching your kids (and grandkids) how money works — budgeting, investing, compound interest, and smart decision-making can help ensure the success of your estate plan.
- Work With Professionals
A business accountant (like Nobel Thomas), financial planner, and a lawyer can help structure your affairs to maximise long-term wealth and compliance.
Common Pitfalls
- No plans for wealth transfer
- Overexposure to debt
- Lack of communication between family members
- Not updating wills
- Assuming wealth alone will be managed wisely by future generations (this is a big one!)
Remember: it’s not just about what you leave behind, but how you prepare your family to handle it.
Final Thoughts
Generational wealth isn’t only for the ultra-rich — it’s something that everyday Australians can and do build over time. If you are likely to be left with assets when you pass away then it is important to plan for the future. It starts with making smart decisions today, putting the right structures in place, and teaching future generations the value of preserving your assets.
