In today’s question-and-answer episode, I chat with Ken Raiss, director of Metropole Wealth Advisory, who shares his knowledge of property and wealth management.

We're going to discuss three of your questions about how to help your children into property, including questions about how to stop your children from squandering their inheritance and what happens to your superannuation when you die.

Even if you don't have children yet, I think you're going to benefit from some of the pearls of wisdom Ken drops.

Q&A Day with Ken Raiss

Question: We are in the fortunate position to have paid off our home and have a number of investment properties, but now our children having difficulty getting into the property market, in part because it's hard for them to save a sufficient deposit to buy the type of home they’re wanting. What's the best way of helping our children into property?

There are three major strategies to achieve the desired outcome of helping your children into property.

A deposit gift – Some parents are gifting their adult children enough funds to cover a part or all of the deposit to buy a property and then their children remain responsible for the bank loan.
1. The property in these circumstances is owned by the child and is subject to all the normal issues with asset protection.
2. Some clients support their children by guaranteeing a higher loan and so do not actually pass over any funds.

i. However, they must be very careful as in the event of a default you would be liable for the full loan and could lose any security you may have given, such as your family home.

ii. Parents should try to limit any guarantee to the minimum amount required and when the property grows in value sufficiently arrange for a refinance so that they can be removed as guarantors.

Buying for a minor – Another strategy is purchasing a property for a minor in their name with the proper notations on the title.
1. Parents will be the child’s legal personal representative and will have the responsibility of managing the property.

i. When the minor becomes an adult, parents will need to take a copy of the birth certificate and evidence that the child is still alive to the relevant government department, which will then make the necessary title changes.

ii. There will be no stamp duty or capital gains tax on this title change.

Using a trust – In this strategy, a family trust is used to purchase the property and parents are then the trustee of the trust.
1. When the time is right, parents can pass control of the trust over to their adult child.
2. With the correct advice when setting up the trust structure and a company as a trustee, there will be no capital gains tax or stamp duty payable.

Question: We have a son and a daughter. We're both in our 70s and have some rental properties.

We're afraid our daughter might sell one of the two rental properties she would inherit.

Is there some way of preventing that from happening that we can include in our will so that she can continue earning rental income for the rest of her life?

Also, we didn't understand the testamentary trusts and three tranches that you wrote about. Would you please explain these?

● One possibility would be to establish in the will that assets, properties, shares, cash, or whatever go to a testamentary trust for any children.

o A solicitor would probably suggest one for each child.

o The trust may say that the kids simply get the income from the assets distributed to them. Alternatively, the three tranches are an option.

● For a family or individual with good assets, a testamentary trust may make a lot of sense, or it may not. Seeking the advice of a good solicitor should be the first step.

Question: What happens to my super when I die?

● The standard answer is what they call a binding death nomination that specifies that 100% will be left to the surviving spouse, or 50% to the spouse, and 50% to the children, or whatever other solution is preferred.

o But in industry or retail funds, the will needs to be updated every three years. If that doesn’t happen, it becomes nonbinding.

▪ Nonbinding means the trustees of those super funds have some input to maybe do something differently.

● The other issue is that people who have got a larger super balance need to be more careful, because, on the death of one spouse, it may not be allowed to be fully transferred to the surviving spouse.

o The maximum caps at 1.7 million at the moment, but that goes up with inflation over time.

o In this situation, people need something more robust to say how much is going to go directly to a surviving spouse and how much will come out.

Links and Resources:

Ken Raiss, director of Metropole Wealth Advisory

Have a chat with Ken Raiss to ensure you have the correct asset protection strategies in place – click here

In turbulent times like we’re experiencing why not get the team at Metropole on your side to give you holistic property and wealth advice– find out more here

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Some of our favorite quotes from the show:

“Only last week I was looking up something, doing some research, and I found the latest statistics in Australia suggested 50% of first marriages now divorce.” – Michael Yardney

“For many Australians, most Australians their superannuation is going to be, after their home, probably their biggest asset.” – Michael Yardney

“I think the important note is that your super isn't automatically included in your will because it's not your asset and unless you give certain instructions to your super fund trustee, it may not end up where you want it to be.” – Michael Yardney

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The TaxPert Session: Q&A Day with Ken Raiss

Property Investment & Wealth Creation Australia | The Michael Yardney Podcast