Inheritance Expectations Meet Reality: Why Gen Z May Be in for a Shock
A growing number of young Australians are banking on a financial windfall from their parents and grandparents, but new research suggests many may be overestimating what they will receive.
Read full article in Australian Financial Review
According to a recent survey conducted by Colonial First State (CFS), nearly half of Australians aged 18 to 29 expect to inherit more than $525,000—almost double the amount anticipated by those aged 50 to 64. This optimism is largely driven by the belief that rising property values will translate into larger inheritances. However, experts warn that these expectations may not align with the financial realities facing older generations.
Craig Day, Head of Technical Services at CFS, notes that younger Australians often view inheritance as a pathway to home ownership. “They are thinking, those sky-high property prices must flow through to a larger inheritance,” he explains. Yet, the costs associated with longer lifespans, aged care, and debt repayment are increasingly eroding the wealth that might otherwise be passed down.
Craig Phillips, a financial adviser at Phillips Wealth Partners, works primarily with clients aged 75 and older. He observes that many underestimate the financial burden of aged care. “Once we explain to them what the aged care landscape looks like, sometimes their priorities change,” says Phillips. He adds that the need to fund accommodation deposits—averaging $572,000—can significantly delay or reduce inheritances, especially when one parent remains in the family home.
Further complicating matters, upcoming changes to aged care regulations will allow facilities to retain up to 10 per cent of these deposits, reducing the amount refunded to families. Modelling from Pitcher Partners indicates that an 84-year-old on the single aged pension with $1.25 million in assets will pay an additional $34,469 annually for aged care under the new rules.
CFS Chief Executive Kelly Power emphasizes the importance of prioritizing retirement needs over inheritance expectations. “These are difficult conversations, but they are necessary,” she says. Despite 82 per cent of survey respondents expressing a desire to leave an inheritance, only 38 per cent have a will in place.
The disparity between anticipated and actual inheritance amounts is stark. While JB Were estimated the average inheritance at $706,806 in 2024, the Productivity Commission previously placed it at just $125,000. Among advised clients—those receiving professional financial guidance—40 per cent intend to leave $500,000 or more, suggesting that expectations may be more realistic within this group.
Ultimately, the message from experts is clear: families must plan early and communicate openly. “It is not just about passing on wealth—it is about passing on clarity,” says Day. “Families need to talk about their intentions, their needs, and their plans. That is where advice becomes invaluable.”