Ask an Adviser - Downsizing From The Family Home

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Matthew Bazzica

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It’s a common question that I get asked on how retirees can better help their children financially. In my work advising pre-retiree’s, this topic is critical and the earlier you address it, the better your prospects for success.

There are 3 main strategies to consider here.

GIFTING - You could commence giving away money to your children now. This is called Gifting. You may gift up to a maximum of $10,000 per financial year, limited to $30,000 per 5 financial years. There are rules that you need to abide by as to not affect any entitlements you may be receiving from Centrelink. Money that may have been gifted in the 5 years prior to retirement will also be part of the gifting rules.

Set Up A TESTAMENARY TRUST - If you wish to leave a legacy to your children, you could look at having a Testamentary Trust that would commence upon death. The trust would then own your assets with your children being the beneficiaries of the trust. This arrangement allows you to have maximum asset protection with your estate. In the event any of your children became divorced or are personally sued, the assets under this arrangement are not owned by your children, therefore the assets are protected, giving you peace of mind that your hard earned dollar is not going to land in someone else’s hands.

Use TAX EFFECTIVE Investments - Another thing to consider is how these funds could be potentially invested in a tax-free environment. You could consider a 10 year Investment Bond allowing you to invest your money for a period of 10 years without having to pay any capital gains tax on your investment earnings.  There are some rules you need to abide by.  After the first year you can make additional payments up to 125% per anniversary year. This option can also allow the investments to be dealt with via the product and not your estate.

The most important thing to do is to seek professional advice. Review your circumstances to identify exactly what you wish to achieve. You could also go online or talk to Centrelink.

Remember, when you wish to pass money to your children, you stay within the gifting rules as to not jeopardise any potential Centrelink benefits. Also identify when you wish for your children to receive the money, how these funds can be invested and with asset protection in mind. It is important to make sure that you know the most effective manner in passing money to your children in retirement, giving them some financial security and well-being depends on you making prudent decisions here.

Make sure you get quality advice….

This information is general information only. You should consider the appropriateness of this information with regards to your objectives, financial situation and needs.

 

While the Adviser Ratings Website facilitates the question and answer functionality, all such communications are between users and authorised financial advisers, of which Adviser Ratings has no affiliation. Adviser Ratings is not the advice provider and does not provide financial product advice and only provides information that is general in nature.

Article by:

Janice from Sutherland, NSW

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