Hi Dean, my partner and I are in our late 60s and considering how best to structure our finances to pass on wealth to our children and grandchildren. We want something efficient, flexible and simple to manage. What should we be thinking about? Regards, Julie and Robert, Mosman
Hi Julie and Robert, It’s fantastic that you’re thinking ahead about the process of transferring wealth to your family. Intergenerational wealth transfer can be a complex and sensitive topic to discuss, but with the right strategies, you can ensure your loved ones benefit in a tax-efficient and meaningful way.
One of the simplest methods is gifting during your lifetime. Whether it’s contributing to a grandchild’s education, helping with a house deposit, or funding a business venture, gifting allows you to directly impact your family while you’re around to see the benefits. This can also reduce the size of your estate, which may be advantageous if taxes or disputes could be an issue. There is no limit on the amount you can gift during your lifetime. However, if you’re receiving a government pension, large gifts might affect your eligibility, so planning ahead is crucial. It is also important to ensure you retain enough funds for your own living expenses and any unexpected costs.
Another powerful tool is the use of a family trust, which provides flexibility and control over how and when your wealth is distributed. Trusts can be particularly effective in protecting assets from creditors, divorce settlements, or disputes while also offering tax advantages. For context, income from a trust structure may be distributed to beneficiaries in lower tax brackets, potentially improving the family’s overall tax position. Family trusts can also ensure that your wealth is preserved for future generations as a trust is separate legal entity which can live on after you pass. However, it’s important to be aware that setting up and managing a trust involves legal and administrative costs, as well as compliance with tax regulations. Consulting with a financial advisor or legal expert can help you determine whether this option suits your needs.
Finally, don’t overlook the role of superannuation in transferring
wealth. Super is one of the most tax-effective vehicles for investment as well as passing on assets, especially if structured correctly. Earnings in superannuation are taxed at just 15%, and once in pension phase, they become tax-free. Additionally, superannuation death benefits are often paid tax-free to dependents such as a spouse or financial dependent children. For non-dependents, like adult children, some taxes may apply, so it’s essential to plan carefully. To ensure your super is distributed according to your wishes, it’s always important to ensure you have a valid binding death benefit nomination in place.
Each of these strategies has unique benefits, and the right choice depends on your family’s needs and financial goals. A combination of gifting, trusts and superannuation can provide a balance of flexibility, tax efficiency and security for your heirs. To make the most of these options, I highly recommend seeking advice tailored to your personal situation.
If you’d like to discuss this further, feel free to reach out on 8376 0350.
Best regards, Dean Cowdroy
Financial planner Dean Cowdroy of Up Wealth Management is an Authorised Representative of Consultum Financial Advisers Pty Ltd, AFSL 230323. Phone 8376 0350 or visit upwealthmanagement.com.au
Any advice or information in this publication is of a general nature only and has not taken into account your personal objectives, financial situation and needs. Because of that, before acting on the advice, you should consider its appropriateness to you, having regard to your personal objectives, financial situation and needs.