I wish to give my three children aged 60, 62 and 65 a substantial amount of money. I consider them not to be the best money managers, and thus I am trying to decide what would be the best way to do this so that they could make efficient use of the money so that it lasts for some time. I was thinking to open super funds and use the bring forward rule. They have super funds but with small balances. I would appreciate your thoughts.
I guess the reality is that they will get the money when you die anyway, so if you give it to them now, you can at least guide them in the best way it should be invested. I think contributing the money for their superannuation funds as non-concessional contributions would be a good idea.
If you’re concerned your children may use your inheritance unwisely, it may be worth planning it sooner rather than later.Credit: Simon Letch
If you wish you could contribute up to $110,000 each now and up to a further $360,000 each after June 30 as the limit on contributions will have increased then. They have all reached at preservation age which means they will be able to access the money when they wish, but it’s a perfect chance for you to get involved and discuss the best funds to use and the best asset classes they should choose.
I’ve read your description of the withdrawal-and-recontribution strategy, used to reduce the tax liability on any residual superannuation for my non-dependent beneficiaries once I shuffle off this mortal coil. I wonder about the possible unintended consequence of executing such a strategy, in relation to the available cap space of my Transfer Balance Cap (TBC). Currently, my ATO webpage advises that my available cap space is $1.2 million, and my TBC is $540,000.
I’m 68 and thinking about withdrawing $330,000 from my superannuation pension account as a lump sum – and then, within a few business days, recontributing this entire amount to my accumulation account. I will then immediately ask my super fund to move any money remaining in the pension account into the accumulation account, combine all the funds, and create a new pension account for me.
Will that result in my transfer balance cap increasing by $330,000, with an equivalent reduction in my available cap space – even though the entire $330,000 will be placed back into a new pension fund within days? I hope not to be constrained by a reduction in the available cap space caused by my manoeuvre.
I have good news – the withdrawal of the $330,000 as a lump sum commutation from your existing superannuation pension will in essence ‘reduce’ the $540,000 counted for your TBC.
Therefore, when you then recontribute the $330,000 to start a new superannuation pension, it will then count against the reduced TBC, resulting in your TBC still being $540,000 once all the transactions are finalised.
Recently, you wrote about eliminating the death tax on super by withdrawing the money and then leaving it to your children via your estate. I have recently changed the beneficiary with my super fund to be my estate, will this have the same effect? I am 66.
The death tax you mention cannot be eliminated by simply leaving the money to your estate – all that will do is reduce the tax from 17 per cent to 15 per cent as there would be no Medicare levy.
The ideal strategy is for you or your attorney to withdraw the money tax-free at an appropriate time before your death and deposit that money in your bank account. Those funds can be left via your estate with no tax implications.
My husband and I own a debt free home worth $1.2 million where we have lived for 16 years. We are considering downsizing, possibly to a buy an off the plan home up to about $850,000 which requires a deposit. Would you suggest we withdraw the deposit funds from his super intending to putting it back, plus the downsizer super contribution, once our house has sold? What are the tax implications of doing this? I am 61 and intend to continue working for a few years yet, but my husband is hoping to retire at 66 next year. Any information would be appreciated.
Once you reach 60 withdrawals from superannuation are tax-free, but to access your super before 65 you will need to satisfy a condition of release which means you need to retire from a job – it need not be your full-time job.
I don’t see any downside here, but the money may have to come from your husband’s superannuation and not yours because of your ages.
Noel Whittaker is the co-author of Downsizing Made Simple with fellow finance expert Rachel Lane, available here. Email: noel@noelwhittaker.com.au
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My children are bad with money. How should I pass on my inheritance?
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19.03.2024
I wish to give my three children aged 60, 62 and 65 a substantial amount of money. I consider them not to be the best money managers, and thus I am trying to decide what would be the best way to do this so that they could make efficient use of the money so that it lasts for some time. I was thinking to open super funds and use the bring forward rule. They have super funds but with small balances. I would appreciate your thoughts.
I guess the reality is that they will get the money when you die anyway, so if you give it to them now, you can at least guide them in the best way it should be invested. I think contributing the money for their superannuation funds as non-concessional contributions would be a good idea.
If you’re concerned your children may use your inheritance unwisely, it may be worth planning it sooner rather than later.Credit: Simon Letch
If you wish you could contribute up to $110,000 each now and up to a further $360,000 each after June 30 as the limit on contributions will have increased then. They have all reached at preservation age which means they will be able to access the money when they wish, but it’s a perfect chance for you to get involved and discuss the best funds to use and........
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