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Ask Paul: Should I give my kids their inheritance now?

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Q. I 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.

ask paul clitheroe early inheritance

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! - John

A. 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 as an early inheritance 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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Paul Clitheroe AM is a respected financial adviser and Money's chairman and chief commentator. He is chair of the Australian Government Financial Literacy Board, and author of several personal finance books. Click here to email Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section.
Comments
Phillip W Harding
October 10, 2018 5.36pm

What about the gifting limitations when receiving a pension Paul? Is this a consideration?

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