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Supporting Children Financially - When to Share the Inheritance

It is not unusual for "baby boomers" to be still supplying financial assistance to their grown children. This dependency can be detrimental for both parties, because parents might be sacrificing funds that they should be investing for their retirement years by supporting their children.

Meanwhile, the children may become overly reliant on their parents generosity and never truly stand on their own two feet. However, cutting the cord is sometimes not an option because your children or grandchildren might really need the money.

Fortunately, some parents are in a position to help their children without jeopardising their retirement - they can simply share an inheritance. In other words, they can gift their children money or property now that they would have inherited in a will.



When and How To Share an Inheritance

You should be very careful when sharing an inheritance, because if done incorrectly it can lead to stress and serious legal troubles in the future. Fortunately, there are some steps that you can take to reduce the stress and risk involved, including:

  • Parents should only share funds or property that they will not need for their own retirement and future personal well-being.
  • If large amounts of money or property are involved you should consult with a solicitor or financial planner. There might be tax and/or legal consequences to be considered.
  • Consult with everybody in the family. Make sure all of the children understand what is happening and why.
  • Be prepared for some disputes, because one child might expect to inherit more than they actually receive.
  • If you are sharing an item that you yourself inherited, check the will under which you received that item to make sure you are allowed to give away. Some wills restrict what you can do with inherited property eg you may only have a life interest in the property and as such are not able to give it away.
  • Only share property or money with family members that will use those assets responsibly. If a child is irresponsible or has a substance abuse or gambling problem, giving him or her money will only do more harm.
  • If you want children to inherit something jointly, make sure that they agree upon the joint inheritance. The last thing you want is to start a family squabble over property or money.
  • Make sure you get expert legal advice and financial planning advice before you share an inheritance.Bridges Financial services can provide you with advice on estate planning, life insurance, retirement and other topics to help you make an informed decision. Your own lawyer will also be an important advisor
  • Find out how the inheritance will affect your children’s tax situation. Sharing a large amount of money might increase their income tax, or decrease their eligibility for government benefits such as the Low Income Super Contribution.


Setting up a Trust

A potential way to help your family and avoid future conflicts is to set up a trust savings and/or investment account for the benefit of your family.

To setup a trust savings account for your children, identification for both parties is needed. You will need a membership and an account with Holiday Coast so your account and your child’s trust can be linked on our system. The money can be handed over to the child or children(the beneficiary) at any stage, so it is important to get the timing right.

Again we encourage you to seek professional advice from your lawyer and your financial planner before making any such investment decisions or setting up a trust.


This article provides general information only and should not be relied upon as financial product advice.

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