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Information provided on this website is general in nature and does not constitute financial advice. Every effort has been made to ensure that the information provided is accurate. Individuals must not rely on this information to make a financial or investment decision. Before making any decision, we recommend you consult a financial adviser to take into account your particular investment objectives, financial situation and individual needs.
Giving to the Children
What every C.E.O needs to know before helping out the family
Australians are increasingly considering the needs of their grandchildren when deciding how to use their money.
Passing on wealth can be one of our greatest gifts to our family but it’s important to consider the benefits and potential drawbacks of what is called intergenerational wealth transfer.
“These days many parents are returning to work full-time and it’s the grandparents who are stepping in to help out. Many of my clients are playing an increasingly larger role in helping to bring up their grandchildren and as such are far more invested in their day-to-day lives” FinSec Partners Adviser Michael Balogh says.
“Add to this the issue of school fees, university fees and housing affordability and it is little wonder that many clients want to help out”.
Asking the right questions
Strategies around wealth transfer will mean different things for different people.
For this reason, Michael says “It’s important to ask the right questions in order to really understand what clients are trying to achieve. Only then can we design the right strategy”.
Here are some of the things to consider
- Age and income of your grandchildren: Remember investment income for minors is taxed at penalty rates, whereas, for over 18s, investment income up to $20,542 with the low income tax offset, may be tax free.
- Centrelink benefits: If you receive a pension or part-pension from Centrelink you can only gift a maximum of $10,000 per financial year, up to $30,000 every 5 years (or $6,000 every financial year) without adversely affecting your entitlements.
- Pay yourself first: Grandparents can fall into the trap of being ‘too generous’ and not properly considering their own living and lifestyle needs in retirement. Make sure you understand the money you require before committing to help out your family.
- Find the balance between a ‘kick start’ and creating a ‘sense of dependence’. Offering too much support can do more harm than good.
Above all it is important to get expert advice. Start by contacting a financial adviser who is experienced in the field of intergenerational wealth transfers, aged care and
retirement strategy.