When it comes to passing on wealth to the next generation, many people assume that distributing assets through a Will is the most straightforward option.
But there is another strategy that’s becoming increasingly common in Australia.
Gifting assets during your lifetime.
Gifting assets while you’re still alive can offer advantages, but it also comes with legal, financial and personal considerations that are important to understand. Like many estate planning decisions, there is no one-size-fits-all approach.
This article explores how lifetime gifting works, when it may be appropriate, and how Bayside Wills and Estates can help you assess the best path forward as part of a comprehensive estate plan.
What does it mean to gift assets during your lifetime?
Gifting assets refers to the process of transferring ownership of property, money or other valuable items to another person without receiving anything in return.
Lifetime gifting simply means doing this while you are still alive, rather than leaving those assets in your Will.
Examples of gifting assets include:
- Giving your adult child a deposit for their first home
- Transferring a share of a family property to a child or grandchild
- Making regular financial contributions to assist with education or living costs
- Gifting sentimental items, such as jewellery or artwork, ahead of time.
These types of gifts can strengthen family ties and allow you to see your loved ones enjoy their inheritance, but they need to be managed carefully.
What are the potential benefits of gifting assets early?
One of the main benefits of gifting assets during your lifetime is being able to support your family when they may need it most, such as helping a child buy a home or supporting a grandchild through university.
Some people prefer to gift while alive so they can witness the positive impact their support has on younger generations.
Other benefits of gifting assets during your lifetime may include:
Reducing the size of your estate
Gifting can reduce the total value of your estate, which in turn may lower administration costs and reduce the risk of disputes between beneficiaries.
Avoiding future claims
In some cases, lifetime gifting can be used to reduce the likelihood of a family provision claim under the Administration and Probate Act. However, this area of law is complex and needs careful consideration.
Building stronger family relationships
Gifting can be an opportunity for open discussion around your intentions, helping to minimise confusion or resentment later on.
At Bayside Wills and Estates, we often see families benefit from early conversations around estate planning when lifetime gifting is part of the strategy.
What risks should you be aware of?
While gifting assets early can be rewarding, it is not without risk. Some of the most important considerations include:
Loss of control
Once you give something away, it generally no longer belongs to you. If circumstances change, for example, a breakdown in the relationship, financial hardship, or a need for aged care, you may not be able to recover the asset.
Centrelink implications
Centrelink has strict rules about gifting. If you give away assets within five years of applying for the Age Pension, the value may still be counted towards your assets test. This can affect your entitlements and eligibility.
Family law complications
If you gift a property or funds to a child who later separates from their partner, the gift may be treated as part of the relationship’s asset pool. This can result in unintended outcomes during property settlement.
Unequal treatment of beneficiaries
Lifetime gifting can cause tension if some beneficiaries receive more than others. If this is not clearly addressed in your estate planning documents, it may lead to disputes after your death.
These are just a few of the reasons why professional advice is essential before gifting assets. Our estate planning services take all of these factors into account.
How gifting interacts with your Will
Gifting assets while alive does not remove the need for a legally valid Will. In fact, it makes it even more important to review your Will and ensure it reflects the decisions you’ve made.
Your Will should clearly document which assets remain in your estate and how they should be distributed. If you have made substantial gifts to certain people, you may also wish to include a clause explaining your intentions, especially if you want to prevent future misunderstandings between beneficiaries.
If not managed properly, lifetime gifting can unintentionally unbalance an estate or lead to claims from disappointed beneficiaries. That’s why we recommend seeking expert Wills and Estates Services in Melbourne that provide a holistic view of your personal, financial and legal goals.
What’s the best way to approach gifting?
There is no universal rule for when or how to gift assets. Some people prefer to leave all distributions to their estate, while others choose a mix of lifetime gifts and testamentary gifts.
At Bayside Wills and Estates, we recommend taking the following steps:
- Clarify your goals
Think about why you want to gift now. Is it to help with housing? Education? To simplify your estate? The purpose will shape the right approach. - Review your financial position
Make sure you retain enough assets to cover your future living expenses, including aged care and medical needs. You should consider taking the advice of a financial planner in this regard. - Talk to your family
Open discussions about your plans can help avoid confusion and ensure expectations are clear. - Seek legal advice
A lawyer who specialises in estate planning services can help you document your intentions properly and avoid costly mistakes.
Do it the Right Way with Bayside Wills and Estates
If you’re thinking about gifting a family asset or reviewing your current estate plan, our experienced team is here to help. We provide tailored Wills and Estates Services in Melbourne’s Bayside, designed to give you clarity and peace of mind.
We take the time to understand your circumstances and help you weigh the benefits and risks of gifting assets. We also ensure your Will is aligned with any gifts made during your lifetime so your overall intentions are protected.
Book a consultation with Bayside Wills and Estates, or contact us today or call 03 9592 2848 for a confidential discussion.
