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Investing for your Children’s Future

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kidsplaying-6Every parent wants the best for their children. If you are in a position to invest money specifically for your children’s future, you should follow the same approach as if you were investing for yourself.

 

 

The first step is to clearly identify why you are investing, then set yourself a goal and put a strategy in place to achieve that goal. Your strategy needs to suit your circumstances, risk tolerance and investment timeframe.

Whether you have short-term goals and want a high interest earning savings fund or you have long-term goals with a focus on managed funds, one vital question you need to consider is ‘Whose name should the investment be held in?’

Children are taxed at penalty rates on unearned income.

There are other tax-effective investment options available including:

  • Investment bonds — income is taxed at up to 30 per cent within the bond and reinvested each year. The proceeds of the bond are tax-free after 10 years and the child can be named as the beneficiary.
  • Investments can be held by, and in the name of, the parent on the lowest marginal tax rate. Although all income is declared in that parent’s tax return, the tax payable on this income may be reduced considerably with franked dividends paid from investments in Australian shares.
  • Implied trusts — the investment is held in the parents’ name in trust for the child. Beware that the investment must be used for the benefit of the child, otherwise the Tax Office can attribute the income to the parents and tax them personally.

As there are a number of options to choose from, make an appointment with us today to determine the right choice for you and your children.

Source | IOOF

Cover That’s Designed for Little & Big Kids

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CoverforKidzFor parents, there’s no greater pleasure than watching your kids grow into healthy happy adults.

Childhood is all about great experiences and big adventures. However, it’s not possible to prevent every childhood accident or serious disease. If, sadly, something were to happen to your children, how financially prepared would you be? It’s a conversation worth having.

 

BE READY TO LEND A HELPING HAND

A family with a seriously ill or injured child can face financial stress. Mounting medical bills and time off work to care for the child take their toll. That’s why understanding the benefits of child cover can help you get the right cover if something unforseen were to happen to your child.

 

WHAT TO LOOK FOR

Child cover offers can vary quite a bit between providers. It’s helpful to understand some of the key areas to look at when determining which cover best suits you.

 

Lump sum benefits can be as high as $200,000. Some providers include $10,000 in child cover premium-free for each eligible child as part of a lump sum or income protection policy, so this is worth investigating.

 

In addition, it’s important to look at the cut-off age for child cover, which isn’t necessarily just for little kids. Some providers make it available up to age 21 at which stage a lot of big kids have started driving and are going out without their parents. At this stage in life, children can be exposed to greater risks, increasing the possibility of injury through accidents.

 

If you move to another policy, including a spouse’s policy, consider if you can take your child cover with them. There are providers that allow fully-transferable child cover without the need for a re-assessment so kids can easily remain covered.

 

When a child grows out of child cover, you may want to continue covering your young adult children. To make it easier, often child cover can be converted to life cover, with linked or stand-alone trauma cover, without the need for any medical underwriting.

 

To find out more about child cover, talk to us today and see how we can help you further.

 

Source I Asteron

unbeknown

The trouble with life insurance…

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The importance of life insurance

unbeknown

trouble coming!

If illness, injury, or even death were to happen to an adult child who had just purchased a home, it would be quite likely that the child would have trouble meeting mortgage repayments and could possibly even lose the home.

With lump sum covers, the easiest way to do this is to set up a non-super life policy owned by the parents on the life of the child. This ownership structure would satisfy CGT exemptions under section 118-300 ITAA97 for term life and section 118-37 ITAA97 for TPD and trauma.

The level of cover should at least be the amount of the loan or gift, so that the parents would not have a shortfall if an insurable event occurs. Income protection for the child should also be considered. This must be owned by the child to ensure that a tax deduction can be claimed. Once the loan is repaid, the parents have the option of transferring the insurance cover to their adult children, so they could assume premium payments.

Contact your financial adviser today to find out the best option for you.

money gift

Helping the kids buy a home

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Helping the kids buy a home and protecting parents’ interests

money gift

Thanks Mum & Dad XOX

A recent survey of Australians aged 50 and over has revealed that parents give $22 billion a year to their adult children to help them get established, buy property and tide them over tough times.

Gift, loan or other?

One way to help adult children buy a home is providing them with money to help with a deposit. The gift may be given directly or contributed to a First Home Saver Account, a tax-effective way to save for a home. Any asset or amount over or above $10,000 gifted by a single person or couple in a single financial year or above $30,000 over a five-year rolling period impacts on parents’ pension entitlements for five years.

A better way to provide support and to protect parents’interests is through a written loan agreement. This would ensure that the parents’ rights are protected in the event a child’s relationship with his or her spouse or partner broke down.

Another option is for parents to provide guarantor support for their children by providing either the parents’ home or term deposits as security. Finally, parents could consider buying the property jointly with their children, but this would mean the parents would have their names on the title deeds.

For both guarantor support and joint ownership of property, parents need to be aware that they are fully liable for their child’s loan obligations. The possible effect on parents’ pension entitlements should also be a consideration in both arrangements.

 

As further protection, parents who gift or lend money can insist that their child and spouse or partner enter into a binding financial agreement to ensure that the gift or loan is repaid if the relationship fails. Parents should always obtain specialist legal and taxation advice when setting up a loan for their children.

 

Here are some options to consider:

 

• Should the loan be on interest free or commercial terms?

• If interest is charged, will it be fixed or variable or pegged to a bank interest rate?

• Should the loan be open ended or does it need to be repaid within a certain time frame?

• Should parents request security over the debt, even through the agreement is classed as a personal debt?