Ask Paul: I have $500k in super, should I give $200k to my kids?

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Dear Paul,

I am living with my daughter and her husband. I have $500,000 in super but no other assets.

I live a comfortable life and have just started receiving the age pension.

ask paul should i give half my super to my kids

I have two children living independently.

Can I give $100,000 to my children to help them now rather than wait until I die? - Bernadette

I like your attitude, Bernadette. Giving money early to the kids is a very personal issue and can have all sorts of family complexity.

The personal issues I will leave to you.

But the absolute rule number one is to ensure you are financially secure. This means thinking through health issues, what happens if you need to go to an aged care service in time to come, with high upfront costs and so on.

It also needs a good think about how much you may need over the aged pension to live well.

Once you have thought over these quite complex issues and are certain that you will be as secure as you can be, then giving money to your kids may make sense, but it is critical we consider the impact on your pension.

Under the "deprivation" rules, when it comes to impacting your pension, you are only allowed to give away $10,000 a year, up to a limit of $30,000 over five years. So, if you give away $100,000, in the first year the pension calculation will still assume you have $90,000 when it comes to calculating your pension.

I would suggest you talk to Centrelink about the impact on your pension. It makes quite a difference whether you are a homeowner, single or joint pensioner and so on.

But I really wonder if, after ensuring you are financially secure, you would not be better to gift $10,000 a year to the kids until you reach the $30,000 limit after three years. At this stage you could reassess your situation.

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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 Money TV show, and 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
Entin Nemeyer
September 1, 2021 7.05pm

So when a person have $500,000 still can receive government pension ??

Please explain

Thanks

Entin

Nicole N
September 3, 2021 4.15pm

She mentions that she lives with her daughter and has no other assets (ie she doesn't own her own home). This is how she qualifies for the pension, I would imagine.

Robin PANKIW
September 3, 2021 6.34pm

Beware! Generosity like this can backfire badly - especially if you do not fully own the roof over your head. What if your daughter's circumstances change e.g. separation, divorce, illness, death, financial disaster? Play the "Devil's Advocate". Look at all the "what ifs". Definitely, check with Centrelink and your tax accountant. Gifting to your relatives could leave you homeless and unable to get the pension (for some time at least). Thinking that your generosity will guarantee reciprocal generosity or guaranteed care in later years may not - with the best will in the world - come to fruition. Talk to an estate planner/solicitor about your best options - and make a will. Good luck.