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

By

Published on

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.

ask paul clitheroe early inheritance

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! - 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!

Get stories like this in our newsletters.

Related Stories

Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the television show Money, radio, and most notably this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is Chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Click here to email Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. Please view our disclaimer here.
Comments
Phillip W Harding
October 10, 2018 5.36pm

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

Peter Patina
February 10, 2020 1.17pm

What about in my situation. I have less than a year to live and I wish to leave some shares to my 13 year old daughter but I don't want her to be able to cash them in before she goes 35. What's the best way of doing that?

Money magazine
Verified
February 10, 2020 1.24pm

Hi Peter,

Thank you for your comment. Unfortunately Paul cannot reply to questions in the comment section. We will pass your message on to him for consideration in the Ask Paul section of Money magazine.

- Money team

Lori Smith
July 16, 2020 11.10pm

Hi! I'd like to know if you can give early inheritance on a weekly or biweekly basis. For instance giving the annual gift exclusion which is 15,000 a year, but giving it over the whole year not in a lump sum. Thinking over many years to do this, if that is reasonable?