Aug 15, 2024  | Tags: Inheritance

Our Insights

There’s a new acronym in town – SKI is short for “Spending the Kids’ Inheritance”.

It could be what Mum and Dad are doing right now in Aspen and for their children, it is a very slippery slope indeed.

Many Gen Zers view inheritance as their only hope of ever owning a house – they are banking on it.

So who’s right? Who’s wrong?

And what should you do with your inheritance?

Why SKI?

Retirees are hit with many messages about saving enough for their retirement.

But when that day comes, about 25 percent of them decrease their spending, fearing they don’t have enough.

They fail to switch from a saving mentality to a spending mentality, especially in the first decade of their retirement when they remain fit enough to enjoy it.

Many ultimately die leaving significant savings behind.

Those adopting the SKI trend are motivated by the realisation that their time is running out, often spurred on by a health scare that reminds them of their own mortality.

Some of the other reasons people are spending the kids’ inheritance are:

Life lessons - the fear that a hand out sends all the wrong messages about working hard, saving and investing to succeed.

Wasting it - the fear that the kids will blow the inheritance rather than spend it wisely and build it for future generations.

Cash is not king - the view that experiences are more memorable than a cash hand out, hence it is better to spend it with them rather than leave it to them.

Legal costs - The fear that much of the estate could be lost in legal costs, fees and the potential for challenges to the will.

To SKI or not to SKI

A recent episode on SBS Insight featured Victorians Leanne and Leon Ryland who shed light on the SKI ethos.

It quickly went viral around the world.

The Rylands have already spent more than $170,000 on travel and quickly attracted some distinctly mixed viewpoints.

The loudest crowd labelled the practice “evil” and “entitled”.

One viewer said on X, “Clogging healthcare due to their perceived entitlement for health and refusal to die. Selfish and privileged."

But the couple’s own son, Alex, supported his parents’ lifestyle.

He said, “It's their money. They've worked hard their entire life and invested well in order to get that money so I think they should be able to do whatever they'd like with it.”

The value of inheritance

Family focussed people will always appreciate the value of inheritance and setting up the next generation.

That is especially true in today’s climate of high inflation and rising interest rates.

Fairfax Media reported last year that 70 percent of young Australians think they will never be able to afford their own home.

The reality is that housing affordability has fallen dramatically since the Baby Boomers entered the workforce.

In 1981, when many Boomers were in their 20s and in their first decade of work, the average Australian wage was $15,800 – about a quarter of the median house price of $65,000.

By 2021, the average wage was $93,500 but the median house price was nearly 10 times that or $916,000.

But Boomers didn’t have it all their own way, battling 30-year fixed mortgages of beyond 18 per cent at the time.

So maybe they should be allowed to enjoy the spoils of their toil over many years.

Every generation has its challenges.

Types of inheritance 

An inheritance doesn’t have to be a lump sum.

It can take many forms which should all be explored depending on your own wishes and circumstances.

The most obvious ways are cash, real estate, shares or other investments, jewellery and cars.

Trusts can be established so that certain heirs can only access their inheritance once they reach a particular age.

An alternative option is the gift of education which is when people choose to pay for their children’s and/or grandchildren’s college or university schooling.

Depending on your age and the size of your estate, you may even want to consider gifting part of your inheritance while you are still alive.

Not only do you get to see your heirs enjoy their inheritance but its value and impact on their lives may be substantially greater by receiving it earlier.

Always talk with an experienced financial advisor and accountant on the tax implications of any such decision.

Should kids rely on inheritance?

An inheritance is a blessing and should never be viewed as an entitlement.

Many of today’s Boomers built their own wealth from scratch and were not privy to an inheritance of their own.

The value of hard work and saving are invaluable life lessons which are sometimes lost on those who are left significant amounts of money.

An inheritance should only ever be viewed as the cream on the cake after a working life backed by solid financial principles.

How to plan your estate

When you have decided if and how you want to leave an inheritance to your heirs, there are two things to consider.

The first is communication.

Keep your children in the loop so there are no big surprises when the day arrives.

It significantly reduces the chances of contested wills by making sure everyone is on the same page and giving them the chance to air any grievances beforehand.

If you intend spending the kids’ inheritance, let them know now!

Secondly, always work with an experienced financial advisor.

The importance of professional advice cannot be overstated because it helps to:

• Put a strategy in place (perhaps you can enjoy the fruit of your labour AND look after the kids?)

• Ensure the validity of the will 

• Minimise tax implications

• Reduce the chances of a contest

• Consider obligations involving blended families

Get advice today

It’s your money and you are entitled to spend it how you desire.

And while some of the spirit of ‘SKI’ is worthy of consideration, ultimately a balance of enjoying your retirement while still leaving your heirs something to help them along in life feels right for many.

Planning and strategising your legacy is the key.

That’s where Calder Wealth Management can help.

CWM are financial experts who can discuss all your options with you and help you formulate a wealth strategy and estate plan, whatever it may be.

We understand all the legal requirements and relevant legislation so you can enjoy your sunset years with the utmost peace of mind.

We can also run the rule over your retirement nest egg to ensure you have enough money to spend, while still leaving what you intend to for your beneficiaries.

Contact us today.

Written by Kerryn Shaw

The information contained in this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.

Taxation, legal and other matters referred to on this website are of a general nature only and are based on Calder Wealth Management’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.

Calder specialises in wealth management with a focus on advice, investment, sustainability, insurance and finance.