Where to in­vest $1m for the adult chil­dren

James has re­tired and needs ex­pert ad­vice on ...

Money Magazine Australia - - ASK PAUL -

QI am 60 years old and have just re­tired, although I may do con­sult­ing in the fu­ture to sup­ple­ment our life­style. We would like to have at least $75,000pa to live on.

My (sec­ond) wife and I own our $1 mil­lion home out­right (joint ten­ants) and I have $667,000 in su­per while my wife has $25,000 in su­per. We also own an in­vest­ment prop­erty (joint ten­ants) worth $640,000 ($330,000 ow­ing), which is rented for $650 a week. We are a “blended” fam­ily with two adult chil­dren each.

In my sole name I have $1 mil­lion in a term de­posit at 2.75% in­ter­est that is the part pro­ceeds from the sale of the house that I owned be­fore meet­ing my sec­ond wife. For es­tate plan­ning rea­sons I would like my son and daugh­ter to be the ben­e­fi­cia­ries of this money. Can you ad­vise me on the best place to in­vest this money, and should I set up a dis­cre­tionary trust with my chil­dren as the ben­e­fi­cia­ries? In­ter­est­ing ques­tion, James. I would ar­gue that the first is­sue is to en­sure you have the $75,000 a year you need. Your in­vest­ment prop­erty is re­turn­ing about $33,000 a year, so I would guess about $25,000 af­ter ex­penses. Your joint su­per should com­fort­ably be able to pay you a pen­sion of 4%, so about $28,000. That would give you about $61,000 a year.

You could dial up the su­per pen­sion to, say, 6% to get you to around $75,000 but you should have a long life in front of you and I would want you to seek pro­fes­sional ad­vice to be com­fort­able your fund can sus­tain a pen­sion at that level. Your fund may be able to help you here. Nat­u­rally, any con­sult­ing in­come may fill this gap.

With your kids and es­tate, I re­ally want you to see a so­lic­i­tor and an in­vest­ment pro­fes­sional. My sus­pi­cion is you need tes­ta­men­tary trusts for your kids. Equally, you may need the in­come from the $1 mil­lion for the kids to sup­ple­ment your in­come, with the kids get­ting the cap­i­tal. In the long run, I can’t see a term de­posit be­ing the best in­vest­ment op­tion, so this is where the ad­viser steps in.

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