Give the kids their in­her­i­tance now

With $2.3 mil­lion in as­sets, at 72, John can af­ford to ...

Money Magazine Australia - - ASK PAUL -

QI am 72, sin­gle (di­vorced) and own a mort­gage-free home worth around $1.5 mil­lion. I have $610,000 in an in­dus­try su­per fund. I re­ceive $14,000 a year from an over­seas pen­sion and I also re­ceive $14,000 a year from pas­sive in­come. I have $67,000 in shares out­side su­per and about $70,000 in cash de­posits.

This means I re­ceive about $60,000 a year in in­come, in­clud­ing the 5% taken from my su­per. I’m in the strange po­si­tion of be­ing worth more at the end of each fi­nan­cial year than I was the pre­vi­ous year.

In a pre­vi­ous is­sue it was men­tioned that fi­nan­cial gifts are tax free to the re­cip­i­ents. I have two grown chil­dren in their 30s, both work­ing, with chil­dren and mort­gages.

Would there be any im­pli­ca­tions for me if I took out $100,000 from my su­per­an­nu­a­tion and gifted them $50,000 each? It would make very lit­tle dif­fer­ence to me but would help them a great deal. I would ap­pre­ci­ate your thoughts.

PS: I in­tend splurg­ing about $38,000 on a new car at the end of the year. I bought my present car 22 years ago, so on that ba­sis the new one should see me out!

Cracker of a ques­tion, John. I love re­spond­ing to peo­ple who have more money than they need – it is re­ally re­fresh­ing. I know you have built up this wealth through work, bud­get­ing and in­vest­ing, so good on you.

You have as­sets of about $2.3 mil­lion and $60,000 in in­come, which is more than you need. My first thought would be to en­cour­age you to spend a bit more, not wast­ing money, but on things that give you joy. Maybe an over­seas trip?

But I sus­pect you are liv­ing ex­actly as you want to live, so I’ll leave that to you. I am very pleased you are splurg­ing $38,000 on a car to “see you out”. So, yes, pulling $100,000 out of su­per to gift to your kids is a great idea. They will re­ally ap­pre­ci­ate it at this stage in their lives.

As we live longer, I strongly en­cour­age those who can af­ford to do so to pass the kids their in­her­i­tance in ad­vance. If you go on to 90, which you could eas­ily do, an in­her­i­tance go­ing to kids in their 60s is not a piece of fi­nan­cial ge­nius!

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