Joseph Darby examines the thorny issues of intergenerational wealth transfer

By Joseph Darby*

JBWere's 2025 Bequest Report estimates $1.6 trillion is the total value of wealth expected to pass between generations in New Zealand by 2050. BERL puts the figure at $1.11 trillion over the next 20 years. Media coverage has been breathless. Financial services firms have built entire marketing campaigns around it.

Uncomfortable questions follow. How much of this will actually arrive for typical families? When will it show up? And how much will remain after aged care, retirement spending, tax changes, and the sheer unpredictability of the next quarter-century have taken their share?

Rather than take the headline at face value, let's stress-test it.

What the number doesn't tell you

New Zealand households hold roughly $2.4 trillion in assets, with residential property close to half. Those born before 1966 hold roughly 60 percent of total individual net worth. When transfers come, they will be dominated by houses, not liquid cash.

Distribution is uneven. The wealthiest 20 percent of households hold about two-thirds of total net worth. Statistics NZ's 2024 update found no statistically significant change in wealth for the bottom two quintiles. $1.6 trillion is an aggregate. It says nothing about how much lands in any particular lap.

Timing is also likely to be late. Australian Productivity Commission data shows most inheritances arrive when recipients are in their fifties and sixties. New Zealand demographics are similar. If you are forty-five today and factoring a future inheritance into your financial plans, the timing may disappoint. Most recipients are in their sixties or seventies by the time wealth transfers. By then, the mortgage pressure and school fees it was supposed to help with have long since passed.

Aged care: the wealth destroyer nobody wants to model

Residential care doesn’t come cheap. At Auckland and Wellington providers, published schedules show residential care running from about $73,000 per year for a standard room to over $110,000 with premiums and extras.

The government's residential care subsidy is heavily means-tested. The current asset threshold for a single person is $291,825. Where a partner remains in the family home, the property is generally excluded from the assessment, but if someone is single or widowed, the home's value typically counts. In practice, someone entering care with a house worth $900,000 and $200,000 in savings may be self-funding until assets are substantially depleted. Average funded stays may be around 18 months for many, but long dementia trajectories can last five or 10 years. Five years of care at $90,000 per annum consumes $450,000 before accounting for inflation or the cost of maintaining the property in the meantime.

For many families, the assumption a home will pass to the next generation collides with the reality of selling it to fund care. Care costs consume the wealth long before anyone inherits it. The bills are large, and the maths is unforgiving.

Boomers are spending their own money. Rationally

New Zealanders over 65 are spending more on travel, healthcare, and lifestyle than any previous generation of retirees. Fair enough, they earned it. But it reshapes the maths.

Retirement Commission research shows 40 percent of those over 65 rely entirely on NZ Super, and a further 20 percent have only a small supplement. KiwiSaver has an average balance at ages 61 to 65 of roughly $69,000. These are not people sitting on piles of untouched capital.

Many retirees are also paying attention to the evidence. A 20-year study of 3,200 families by the Williams Group found 70 percent of wealthy families lose their wealth by the second generation, and 90 percent by the third. While this was overseas research, the data would likely equally apply in New Zealand. The primary drivers: poor communication, unprepared heirs, and weak planning. If seven out of 10 inheritances will be substantially gone within a generation, the rational response is to consider whether gifting with intention during your lifetime, or simply enjoying the fruits of your own labour, might produce a better outcome than leaving a lump sum to be squandered.

And plenty of retirees are reaching this conclusion. Local research is lacking, but a 2024 Northwestern Mutual survey found only about 22 percent of baby boomers expect to leave an inheritance. A Charles Schwab survey found nearly 45 percent would rather enjoy their money while still alive. The "Die With Zero" philosophy, from Bill Perkins' book of the same name, has real traction among a generation deciding it would prefer to fund grandchildren's school trips now rather than leave a contested estate later.

The pool of wealth available for transfer is smaller every year. Retirees are simply doing what you would hope people would do with money they spent decades earning.

The trust and property trap

Inland Revenue's trust disclosure data confirms roughly $470 billion in assets held across trusts and estates, dominated by shares and real property. For beneficiaries, this creates a liquidity problem few anticipate. Wealth on paper is not usable wealth.

Receiving a third share of a jointly held house gives you a valuable asset you cannot easily spend, sell, or divide. The common scenario is familiar to any estate lawyer: one sibling wants to keep the family home, another needs cash, a third wants to renovate and sell for a better price. Legal costs, valuation disputes, and strained relationships can run for years, eating into the very asset everyone was supposed to benefit from.

Only 55 percent of New Zealand adults have a will. Most family trusts were established long before the Trusts Act 2019 introduced its disclosure and record-keeping requirements, and many trustees are still catching up with ongoing compliance obligations. The practical gap between "valuable estate" and "money in your account" is far wider than most people assume.

The future is not cooperating with anyone's forecast

Before anyone builds a financial plan around wealth they do not yet own, it is worth recalling how often confident forecasts, including those made by very smart people with very good models and all the best intentions, turn out to be spectacularly wrong.

There are too many examples to count.

HSBC dubbed New Zealand the "rock star economy" in January 2014, predicting growth would outpace the developed world. Within 18 months, New Zealand was on an HSBC vulnerability watchlist as dairy prices slumped and growth cooled. A decade later, per capita GDP had fallen 4.6 percent in the largest per capita recession since the Global Financial Crisis. The same pattern of overconfident prediction appears globally: in the 1980s, the consensus was Japan's economy would overtake the US, right before its asset bubble burst and produced a lost decade. Japan’s economy has never caught the US. And billions were spent preparing for the Y2K millennium bug, which turned out to be one of history's most expensive non-events.

Forecasting complex systems is genuinely hard. The $1.6 trillion figure rests on demographic projections, which are more reliable than economic ones, but the amount and real value of transfers depend on variables no model can fully capture.

Surprises cut in unexpected directions, too.

One variable worth watching: medical breakthroughs are accelerating, particularly in AI-assisted diagnostics and cancer immunotherapy. Every year of additional healthy life is wonderful for human welfare. It also means another year of retirement spending, another year of potential aged-care costs, and less wealth left to transfer.

Which leads to an even larger wild card.

The tax collector has noticed

Politicians of all persuasions have spotted the scale of wealth concentrated in boomer balance sheets, and the fiscal pressure to act on it is growing. New Zealand currently has no inheritance tax, no gift duty, and no comprehensive capital gains tax. Relative to most of the OECD, this is unusual. Whether it remains the case over the next two decades is an open question.

Treasury's Long-term Fiscal Statement projects net core Crown debt reaching 200 percent of GDP by 2065 without significant policy changes. You read that correctly, 200 percent. Net debt has already risen from below 20 percent of GDP in 2018/19 to over 40 percent today. Those numbers create pressure for broadening the tax base, and the obvious targets are headline-grabbing forms of wealth which are currently lightly taxed. Labour has already proposed a capital gains tax on investment property. The Green Party's 2025 alternative budget proposed a wealth tax and a 33 percent inheritance tax. The IMF's 2025 Article IV mission explicitly recommended New Zealand consider a comprehensive capital gains tax and a land value tax.

Regardless of which party is in power, the fiscal gap suggests the direction of travel matters more than the specific form any new tax might take. And here is where the $1.6 trillion headline starts to look particularly fragile: if a CGT, inheritance tax, or wealth tax is introduced before peak transfer years in the 2040s, the after-tax value of transfers materially shrinks. Or more specifically, the great wealth transfer may just be a transfer to the tax collector. Combine taxation with inflation and rising care costs, and the pool available for the next generation is considerably smaller than the headline suggests.

The political difficulty of taxing wealth in a country with high home-ownership should not be underestimated. But Inland Revenue research suggesting New Zealand's wealthiest 311 families pay an effective tax rate of 9.4 percent, compared with 20.2 percent for wage earners, creates political momentum. As boomers age and their electoral weight diminishes, it is feasible voter sentiment may shift toward taxing inherited wealth.

Even without formal tax changes, adjacent policy pressure is building. NZ Super is not means-tested today, but debate about means-testing or raising the eligibility age has intensified as costs rise. Residential care asset thresholds are indexed annually. While not technically taxes, tighter settings would have the same practical effect: retirees using more of their own wealth to live, leaving less behind.

So what should you actually do?

If you are in your forties or fifties, build as if no inheritance is coming. Make your own savings do the heavy lifting. The best financial gift you can give yourself is never needing someone else's wealth. And the best gift you can give your parents is meaning it when you tell them to enjoy every dollar.

If you are the older generation, have the conversation. Not about how much anyone will receive, but about the realities: what care might cost, how assets are structured, what the trust says, and what your own retirement needs require. Consider whether gifting during your lifetime, for a grandchild's education or a first home deposit, might deliver more value than a contested or late bequest in two decades. And if policy changes are coming, whether a capital gains tax, tighter means-testing, or something nobody has proposed yet, make sure your plan can absorb them.

The question worth asking

The Great Wealth Transfer makes for a compelling headline, and sure, some families will pass on meaningful inheritances. But as a financial plan, it is a weak foundation. Distribution will be uneven, timing may be late, aged-care costs are real, retirees are spending more of their own savings, and the politicians are salivating.

Build your own house first. The safest plan for most New Zealand families is to own their financial future outright. Nobody wants to be in a position where they catch themselves calculating how much better off they would be when a parent dies. Financial independence removes the calculation entirely. And for the older generation: you spent decades earning it. Spend it without guilt.

*Joseph Darby is a financial adviser and CEO of Become Wealth. The firm is a licenced provider of financial advice and Discretionary Investment Management Services (DIMS), trusted to advise on over $1 billion. Become Wealth has offices in Auckland and Christchurch, and clients nationwide. Disclosure: This article is the author's opinion and does not reflect the opinions of Become Wealth. Nothing in this publication is, or should be taken as, an offer, invitation or recommendation to buy, sell or retain a regulated financial product. Become Wealth provides financial advisory and investment management services to clients, some of whom may be planning for intergenerational wealth transfer.