Ask Paul: Should we use a super fund to invest for our son?
I'm 41, my wife is 40, and we have a one-year-old son. We put away $1000 for our son when he was born to help him out as a young adult, but we have been unable to decide the best way to invest this for him.
Given our age, we thought it may be appropriate to invest this in a separate super fund in my name as it will only be taxed at 15%.
This way we can continue to add to it and we can access it tax free when I'm 60 as long as I'm retired. What are your thoughts on this? - Christa
Yes, that would work, Christa.
You could keep track of the value of your son's "notional amount" and withdraw that from super for him when you retire but, to me, it all seems a bit distant from your son.
I would much prefer you chose an investment for him. Heather (page 28) asks about investing in a Vanguard exchange traded fund; something like this with you or your wife "as trustee" for your son is, in my view, a good way to go.
My wife Vicki and I recently did this for our first grandchild, except we decided to go with a listed Magellan international fund. We chose the Magellan Global Trust (ASX: MGG) and invested in our names as trustee for our grandchild.
We'll transfer it to her, free of capital gains tax as she is the beneficial owner, when she is an adult, or this will happen through our estate. Hopefully the former!
I'd much prefer the child to have a direct link to the investment.
Don't forget, much of investing for our kids and grandkids is the experience they get as they grow older.
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