The changing nature of legacies
Accelerating house prices are causing inheritances to leap in value, but as many as a third of Kiwis are not expecting to be able to leave a legacy they are proud of to the next generation.
A nationwide survey by wills and estates management corporation, Public Trust, found 33 per cent of respondents felt they were not on track to leave a decent legacy to the next generation.
A high proportion of people who were unsure they would leave a healthy legacy did not have wills, Public Trust found, though chief executive Glenys Talivai said anyone with assets worth $15,000 or more should have a will.
While money and heirlooms figured highly in people’s thinking, many saw passing on their values, culture, knowledge of ancestors, and skills as a more important part of their legacy, Talivai said.
New Zealand lacked academic research into inheritances, though in Australia, where there has also been a house-price boom, an in-depth study from 2019 indicated inheritances were getting larger and being received later in life, she said.
The study by the Grattan Institute focused on the wealth gap between younger
Australians and their parents’ generation, but it showed houseprice rises had created a growing inheritance inequity.
‘‘Inheritances will not fix the problem. Instead, they exacerbate inequality, because the biggest inheritances tend to go to people who are already wealthy,’’ the report says.
‘‘Most inherited money is received by people over 55, so inheritances won’t help young people when they most need the money.
‘‘Inheritances tend to transmit wealth to people who are already well-off. A generation more reliant on inheritances for building wealth is therefore one in which wealth is less equally shared.’’
Like New Zealand, Australia has no database of inheritances, but using public data sources, the researchers estimated the average Australian inheritance was A$773,000 (NZ$828,000).
Patrick Gamble, chief executive of Perpetual Guardian, said the pattern of inheritances handled by the company followed economic trends.
‘‘The bulk of most inheritances is property, and for most people, it is the family home,’’ he said.
‘‘We are seeing a big uptick in the amount of money we are distributing from estates.’’
Longer lifespans meant people were receiving bequests later in life, though that was
partially offset by delayed parenthood.
Gamble said that as some people leaving substantial bequests had been able to help their children get into property, and had seen them prosper, they had decided their wealth should skip a generation, passing it straight to their grandchildren to ensure they did not end up lifelong renters.
A similar pattern was observed by the Grattan Institute in Australia.
About 11 per cent was transferred to other younger
family members, such as nieces and nephews, or grandchildren.
‘‘As life expectancy continues to increase, we would expect today’s young people to inherit even later in life,’’ Grattan researchers said.
Market research done by Perpetual Guardian in 2018 indicated about one in 10 people were relying on an inheritance to save their bacon in retirement.
And those relying on an inheritance were on average expecting to get $500,000 or more.