There is a concept regarding wealth creation and preservation called “the rule of three’s”.
This rule is based on the concept that within a family tree one generation builds the wealth, the next generation enjoys the wealth and the third generation destroys the wealth.
While this is a rule of thumb and no doubt there would be examples opposing this, it does raise some important points.
Receiving financial benefits from generations past does not guarantee that such wealth will be enjoyed with ease.
There are many sobering statistics regarding the financial loss following the receipt of inheritances.
Here are just some which came out of a recent study by the Ohio State University, USA (which may or may not be indicative of behaviours of Australians, which we’ll leave for you to decide).
So if you’re banking on receiving an inheritance in the future, it’s worth remembering that many find it difficult to make the most of it. Sure, the retail industry may benefit, but a bit of planning and forward thinking prior to the receipt of family funds will benefit you, your children, and future generations.
Further, if you’re expecting inherited funds in the future, you may want to keep in mind that many expected inheritances never arrive, or are much smaller than anticipated due to increasing life expectancies, medical costs and in time Government budgetary pressure due to the aging population.
In saying that, many will receive an inheritance, and they do come in all sizes.
Regardless of size, to make the most of inheritances be open to using tax and predator protective structures such as Testamentary Trusts, ensure communication is open and honest before the event, and put some planning in place prior to the cash turning up to avoid overspending on short term items of pleasure; the seed for guilt and disappointment in later years.
By doing so, you can be one of those families who enjoys the benefits of the hard work of previous generations while enabling your future generations to do the same.