Elder abuse

Understanding issues, frameworks and responses
Research Report No. 35 – February 2016

5. Socio-economic context and intergenerational wealth transfer

The socio-economic characteristics of Australia's ageing population raise some significant issues when considering and developing policy responses to elder abuse. The management of the financial resources and assets of older Australians in particular raises significant challenges. This section considers the socio-economic backdrop to the forms of financial abuse described in section 3, and the likely increase in the coming decades in the numbers of Australians with cognitive decline. It also sets out what is known about attitudes to and the dynamics of inter-generational wealth transfers before and after death, and community practices in relation to will-making, bequests and estate contestation.

As a result of the strong economic conditions that have characterised the baby boom generation's life cycle, the aggregated value of the assets that they hold is significant. Baby boomer wealth profiles are characterised by high levels of home ownership and the rewards of the periods of economic prosperity that have occurred throughout their adult lives. One estimate indicates that the total household wealth that may be subject to transfer by bequest (largely due to high rates of home ownership) may be as high as $70 billion in 2030 (Kelly, Harding, AMP, & NATSEM, 2003), up from $8.8 billion in 2000. In addition to home ownership, the introduction of the Superannuation Guarantee system in 1993 has seen substantial growth in levels of superannuation holdings, which in turn has increased the amount of potentially heritable assets. The 2015 Intergenerational Report: Australia in 2055 predicted that superannuation assets - which stood at $1.84 trillion at the end of 2013-14 - could rise to $9 trillion by 2040 (Treasury, 2015). Depending on how retirement income streams are managed, this may mean that in the future substantial levels of superannuation residues may be transferred to beneficiaries posthumously, given the evidence that some retirees manage fears about outliving their income streams by taking a frugal approach to expenditure (Wu, Asher, Meyricke, & Thorp, 2015).

The implications of the home ownership profile of the now ageing baby boomer generation have been studied by human geographers for some time. Writing in 2001, O'Dwyer noted that:

the transfer of housing wealth which will occur when the baby boom cohorts (currently the inheriting generation) reach the end of their life cycles in 20-30 years time may indeed represent a significant transfer of wealth. We already know that home ownership among this generation is very high and they tended to have fewer children than their parents' generation. Thus the pie of wealth will not only be larger, but will be divided between fewer persons. (p. 96)

The extent to which this prediction eventuates will depend on how the baby boomer generation manages its wealth, the extent to which assets are decumulated prior to death, and the extent to which assets are exhausted in meeting financial and care needs over an extended life span (Olsberg & Winters, 2005). Whether distribution of wealth (housing, investments, retirement income streams and residues) occurs posthumously or not, the socio-economic profile of the baby boomer generation means that the emerging generations of older Australians have much greater levels of assets than those that preceded them.

A further influence arises from the disparities in wealth and access to housing between the baby boomer generation and the generations that follow (Barrett, Cigdem, Whelan, & Wood, 2015; Birrell & McCloskey, 2015). The extent to which, through pre- or post-mortem distribution of assets, this will mean that the intergenerational transfer of wealth will support access to home ownership for the children and grandchildren of the baby boom generation has been the subject of some debate in the academic literature. Uncertainties in this context arise in relation to the attitudes of the older generation, the extent to which they voluntarily preserve or transfer assets for and to their children, and the extent to which assets are not exhausted by the need to meet care and health needs in the face of longer life expectancy (Tomlinson, 2012). The concept of "inheritance impatience" has been developed, meaning: "a situation where family members deliberately or recklessly prematurely acquire their ageing relatives' assets that they believe will, or should, be theirs one day" (Miskovski, 2014, p. 18).

Researchers have highlighted the tensions that arise in relation to wealth preservation or dispersal, the care needs of older generations and the wealth transfer expectations of younger generations (Darzins et al., 2009; Wilson, Tilse, Setterlund, & Rosenman, 2009). This is an area where private interests and public policies intersect in multiple and complex ways, particularly in the context of aged care policies being oriented toward developing a self-funded aged care system, and access to the aged pension being means tested. Wilson et al. analysed the issues raised in this way:

older people's assets can be a site of competing interests. Families have an interest in protecting potential inheritances; the market has interests in promoting lifestyle, care and accommodation options, as well as financial products, such as reverse mortgages; the state is concerned with self-provision and financial independence in older age, and, with service providers, also has an interest in preserving assets to pay user charges for health, care and accommodation in older age. (p. 156)

In this context, generational attitudes and expectations in relation to asset transfers before or after death, and the broader question of attitudes and expectations in relation to mutual or non-mutual intergenerational support in terms of material resources and care, form an important part of the backdrop to the social and economic dynamics that may influence the conditions in which elder abuse occurs. Research based on a sample of 7,000 Australians aged 50 and over reveals a significant amount of complexity in some of these dynamics (Olsberg & Winter, 2005). The authors suggested that the findings showed an erosion in the concept "of a strong and supporting family structure" among the participants, with the emergence of a shift away from "self-sacrifice" to "self-interest" in relation to attitudes to obligations by adult children. In part, this was underpinned by a realisation among participants that their resources would need to remain available to fund their own care and would probably be exhausted by the end of their own lives. But the research also highlighted the prevalence of attitudes negating the observation of continuing obligations to provide financial support for older children, on the basis of a perception that the participants had made enough sacrifices in their children's interests and that the younger generation had "had it all". One third of the sample had already provided support for their children to purchase homes, mostly in the form of an informal loan, often interest free. Particular indications of negative intergenerational dynamics were evident among participants who had experienced relationship breakdowns and re-formations, and there was concern among participants about the implications of these dynamics for potential conflicts over inheritance.

The study by Olsberg and Winter (2005) is one of a very limited number of studies on intentions and actions in relation to pre-mortem transfers of wealth, and the dynamics in this area remain little understood. This is particularly so where such a transfer is part of a "family agreement" in which access to housing, or support to obtain housing, is part of a familial (usually intergenerational) arrangement in which it is exchanged for care and support so that a parent may avoid assisted living or aged care arrangements. These agreements may have various degrees of formality, but evidence considered by the House of Representatives Standing Committee on Legal and Constitutional Affairs on Older People and the Law (2007) raised concern about the lack of specific mechanisms regulating them (para. 4.40). The limited evidence available in relation to such arrangements indicates that some may be disadvantageous to the older adult, such as in circumstances where expectations about care are not fulfilled, but the material part of the agreement is irreversible or would take significant effort to reverse (Miskovski, 2014). The House of Representatives (2007) report concluded that "the potentially disastrous consequences that can be suffered by parties to family agreements due to uncertainty, dispute or abuse warrant some form of regulation, particularly if the use of family agreements increases in the future" (para. 4.40). Case studies presented in various reports, including that published by Miskovski, suggest that, in some cases, family agreements and the exercise of powers under enduring power-of-attorney instruments may provide scope for assets to be stripped out of estates.

The available empirical evidence in relation to the post-mortem transfers of assets demonstrates that most people in the older age groups have wills, and that intestacy (not having a will) is rare. In the 50+ year cohort surveyed by Olsberg and Winter (2005), 96% had a will. A more recent study by Tilse, Wilson, White, Rosenman, and Feeney (2015) also evidences an increased emphasis on will-making from middle age onwards. In their community sample of 2,400 people, having a will became more common than not having a will in the 40-49 age group, with 62% of this sub-sample having a will. Increasing increments of participants in the older age groups had a will, rising to 93% in the 70+ age group. The research by Tilse et al. and another study in the same research program on court judgments in will disputes over a one-year period, shed some light on the dynamics surrounding inheritance and will disputes. The analysis suggests that norms and practices in these areas are shifting in line with some social attitudes. From a socio-legal perspective, the context for this has been shifts in some Australian jurisdictions that have weakened longstanding principles in support of testamentary freedom in favour of strengthened recognition of obligations to provide for dependents. In some areas the class of person who may claim entitlement to provision from an estate has also widened (Tilse et al., 2015; White et al., 2015). Consistent with the findings of Olsberg and Winter (2015), Tilse et al. found that participants were not necessarily preserving wealth to ensure a substantial inheritance. Providing for dependents while alive, as well as living comfortably in old age and retirement were seen as just as important. The most common approaches to bequests were providing for spouses and distributing estates equally among children (consistent with Baker & Gilding, 2011). The study indicates that pre-mortem material support for adult children, where the same values in relation to the equal treatment of children in relation to pre-mortem wealth transfers were not evident, is not interconnected to any great extent with approaches to bequests in wills.

The study by White et al. (2015) analysed 195 judgments from 2011 (sourced from AustLII) in relation to disputes over wills, and sheds light on some of the dynamics underlying situations where wills, and the arrangement made in them, are disputed. The analysis showed that the most common class of cases in the sample reflected circumstances where a person with eligibility under the relevant state legislation was seeking to gain or increase a share of the estate (family provision claims, 99 cases). Where the contests involved a partner of the deceased person, 17 (out of 27) involved challenges to provisions made for children of a previous relationship of the deceased, and only one involved a case against the current partner's own child. Where claims were being made by children (73 cases), they most commonly reflected a contest between siblings (43 cases), but challenges by children against provisions made for partners were not uncommon (20 cases). In considering the contests involving siblings, the published account of the research does not shed light on the circumstances that underlie such disputes. In terms of the issues considered in this section, the study findings indicated, consistent with the concerns expressed by the participants in Olsberg and Winter's (2005) sample, that family re-formation is associated with disputes over wills, indicating that complex family dynamics continue to be manifested even at this life stage. White et al. observed that disputes between siblings and those between children of a former marriage and subsequent partner of the deceased are the "fiercest" (p. 902). The authors also observed that the study showed that "competent, financially comfortable adult children are making claims" against estates (p. 906), in contrast to the original intention of family provision law to ensure that widows and children of the deceased were not left financially destitute.

In the study by White et al. (2015), validity was the legal ground most likely to indicate circumstances where elder abuse may have occurred. In the study, two distinct legal categories were grouped together under this heading: circumstances where it was claimed the will-maker did not have the capacity to make the will; and undue influence, where it is claimed that the will is the result of the will-maker's intention being overborne. These grounds were raised in 43 out of 195 cases in the sample.