Succession: Warring families undermining $3.5 trillion of inheritances

Article by Duncan Hughes  |  Published in the Financial Review on 26 May 2023 – 3:53pm

Disputes about inheritance and shared assets are rising because of growing wealth, longer lives and growth in the number of blended families, according to specialist lawyers.

There has been sharp increase in disputes about the validity of wills, particularly whether a testator, or person making the will, has the capacity, which means they are of sound mind, memory and understanding, the lawyers say.

Barrister Giles Stapleton, of Selbourne Chambers and Family Law Chambers in Sydney, says there is also a spike in family disputes involving overseas parents who have bought real estate in the locally domiciled children’s names.

Ines Kallweit, a solicitor with KHQ Lawyers, says more than 90 per cent of cases are settled through mediation, which attempts to identify issues and options, and reach an agreement, in am attempt to prevent expensive and potentially protracted court cases.

That makes it difficult to track the exact number of disputed cases because they can be spread across actions involving testators’ family maintenance, trusts, equity and probate.

Research by ANZ Private Bank has found about 70 per cent of transfers of intergenerational wealth fail because of dissipating wealth, family conflicts, misaligned family values, delays and bungled execution.

ANZ’s analysis is based on 3000 private banking clients over 25 years.

“Planning is critical to well-considered wealth transfer and while each plan will be unique, the most successful plans share a common pathway,” says James Dunlop. ANZ General Manager private bank.

For Graham Raggs, 65, executive chairman of Western Earthmoving, NSW’s largest family owned civil contractor, smoothly handing over control of the business to his four sons, aged 28 to 39, is a key priority.

Graham, his wife Diane, and sons meeting four times a year with select legal and banking experts to prepare for generational change and to discuss strategies for corporate strategies.  “We need to generate wealth, and we need to protect it,” says Graham about succession plans for his company, which has an annual turnover of $325 million, 280 staff and 250 contractors.

In addition to expert legal and banking advice, they also have a non-executive advisory board to discuss issues that will affect the future of the family business.

Graham’s son, Michael, 33, recently took over as chief executive for day-to-day operations and two other sons are directly involved in roles ranging from equipment and training to media content.  Michael says: “Succession planning is a journey, not an event.”

A recent study by the Productivity Commission found the value of  wealth being passed to future generations was expected to nearly quadruple between 2020 and 2030 as Baby Boomers bequeathed as estimated $3.5 trillion to younger generations.

“There has been a massive increase in the number of wealthy people, which has been driven by the growth in real estate prices during the past 20 to 30 years,” says Dunlop.

The ANZ study also found that about eight-in10 private banking clients were concerned about their succession planning.

Dunlop says problems start with wealthy second and third generations, becoming more complex because of the increased number of family members and relationships.  “Including the next generation in conversations about transferring wealth can help equip them with the necessary skills to continue the family plan in the future,” he says.

About $3 million worth of investible assets or debt (excluding the family home) is required to qualify to ANZ private banking.

Duncan Hughes is a Walkley award-winning personal financial reporter, based in our Melbourne newsroom.