Navigating Intergenerational Wealth Transfer: Custodianship & Ownership

Interests surrounding intergenerational wealth transfer have gained significant attention in recent years, as projections estimate substantial sums being passed down to younger generations.

Interests surrounding intergenerational wealth transfer have gained significant attention in recent years, as projections estimate substantial sums being passed down to younger generations. 

As reported in the New York Times, of the $84 trillion expected to be transferred from older Americans to millennial and Gen X heirs through 2045, a staggering $16 trillion will change hands in the next decade. In Australia a similar trend is anticipated with baby boomers estimated to pass on $224 billion annually in inheritance by 2050, creating a $2.5 trillion windfall for younger generations. These immense transfers prompt a deeper examination of the concepts of custodianship and ownership and how they impact the distribution and management of inherited wealth.


Custodianship: A stewardship approach

Custodianship, as explained by Dr Samantah Johnson from the Progressive Policy Institute, emphasizes the responsibility of managing and preserving wealth for future generations. This perspective gains traction as inheritance becomes increasingly substantial. Dr Johnson argues the custodianship fosters a sense of social responsibility among the wealthy, encouraging them to contribute to the well-being of society at large. It aligns with research conducted by Professor David Richards, a sociologist, who suggests that custodianship can help address wealth inequality. By prioritizing social benefits over individual accumulation, custodians are more likely to invest in education, philanthropy and sustainable business practices, thereby contributing to a more equitable distribution of wealth.


Ownership; An individualistic Approach

Ownership, on the other hand, emphasizes the right to control and dispose of inherited assets as desired. Dr Mark Thompson from the Free Market Foundation highlights the incentive for individual success and economic growth that ownership promotes. Economist Dr Alicia Foster from the Center for Economic and Policy Research argues that ownership stimulates economic activity, generating prosperity through innovation and job creation. This perspective emphases the importance of individual agency and autonomy in the management of inherited wealth.


Common Ground

While custodianship and ownership present contrasting views, there is potential for common ground. Dr Johnson notes that encouraging responsible ownership aligned with societal interest can strike a balance between individual success and the well-being of future generations. The sentiment echoes the observation of Professor Jane de Fontenay, who explains that in Australia, heirs often receive their inheritances at an average age of 50, by which time they may have already accumulated significant wealth. Therefore, inheritance may be relatively small in relation t otheir existing assets. This highlights the need for thoughtful consideration of both custodianship and ownership, recognising the complexities of intergenerational wealth transfer.

As an immense wealth transfer looms, this discussion becomes increasingly relevant. Striving for a future that promotes regenerative growth, reduces inequality and supports the wellbeing of all requires a nuanced approach

Dr Johnson states, “balancing custodianship and ownership is crucial for intergenerational wealth transfer. It requires a comprehensive approach that considers social responsibility and individual agency.”

Research by the American Tax Policy Center emphasizes the need for regulatory frameworks that encourage responsible wealth management. By fostering dialogue and implementing policies that promote long-term sustainability while respecting individual autonomy, societies can strike a balance that benefits both present and future generations.