Making the most of your wealth now to help your family

Tips

Generosity takes careful planning

If your retirement is on the horizon or you’ve received a large monetary windfall, it’s a good time to take stock of how much wealth you’ve accumulated and what you want to do with it.

If you are confident of your financial position, and have excess funds, then giving away money to your children and grandchildren is an option. But before doing that, careful estate-planning is the first step.

Estate planning 101

Estate planning starts with the basics – a will.  Although this is obvious, nearly half of the Australian population will die without a will, causing financial delays and unnecessary stress for their families at a time of grieving. 

A will could ensure your assets are distributed as you wish.

Your will may include directions for items such as:

  • property
  • shares, cash and other investment assets
  • power of appointment for family trusts
  • establishment of any post-death structures, for example testamentary trusts.

It is important to understand that not all of your assets automatically form part of your will. In many cases the family home (and other assets) is jointly held by spouses and jointly held assets pass automatically to the surviving spouse. Assets such as your super and certain life insurance policies may be paid to beneficiaries directly from the fund or insurer. So it is important you are aware of your fund or insurers’ policies and any death benefit nominations remain up to date and are integrated into your estate plan.

A solicitor will charge for writing a will, while some public trustee bodies do this free of charge, especially if you are aged over 60. More information about wills can be found at the Australian Securities & Investments Commission MoneySmart web site.

Giving away money before you die

If you are in a strong financial position, then you may consider giving your children and grandchildren a cash gift to help them with, for example, a house deposit, pay a lump sum off their mortgage or make a contribution to private school fees.

Gifting implications

Gifting is giving away your assets or transferring them for less than the market value.

Gifting cash generally does not involve any taxation implications. But realising assets to generate that cash may result in a capital gains taxation (CGT) liability. Gifting non-cash assets may also result in CGT implications.

If you are receiving social security benefits like the age pension, gifting money or assets could have negative implications for your entitlements due to the gifting and deprived asset rules. 

A single person or couple can give away $10,000 per financial year in assets or a maximum of $30,000 spread over five financial years.

However, if the total amount of gifts in one financial year exceeds $10,000 or $30,000 over five financial years, then the excess amount will be assessed as a deprived asset.

For example, if you want to give $50,000 to your child or grandchild during one financial year to put towards a home deposit, then Centrelink will assess $40,000 of this as a deprived asset – this could affect your level of social security benefits.

Money isn't everything

Being generous with your time can be just as valuable a gift as money if you are unable to help your children or grandchildren financially. You can for example, assist with child care, allowing family members to work part-time, or you can have your grandchildren stay overnight every now and again, giving their parents a much-needed break.

Alternatively if your home is large, and your grandchildren are seeking to move away from home, or need a quiet place to study, then using the spare room in your house as temporary accommodation or study room can make a positive difference.

Whether you choose to help with your time or money, your love and support will be greatly appreciated and make a difference, and could help your intergenerational family to bond more closely.

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