Q&A February 2024

Q. We are in our late 70s and own our own home. We have three adult children. Two of our children are financially comfortable and own their own home. My youngest son however is single and lives with us. He would like to own his own home but property prices keep going up and he keeps missing out. He has found a place at quite a reasonable price but unfortunately, he does not have a big enough deposit. Would we be silly to offer to gift him the amount that he lacks because of our other two children, who by the way are comfortable with us helping him?

A. I must commend both of you for being willing to help your son and for your other children to be happy for you to do this. However you may wish to consider giving him an interest free loan rather than an outright gift. I would suggest an agreement be put in place that you could recall the loan at your discretion. This would enable you to protect the value of the loan against a partner in the future (business or lifestyle) and against potential creditors as well.

Q. We have a two year old boy and may try for another child later next year. We would like to start an investment which we could access once our children start high school or universities. What type of investment should we be looking at?

A. There are various types of investments that you could invest in to use in say, ten years’ time, if not later. Investment bonds are one type of product you could look at. Earnings would be taxed at 30% while they are invested but if the investment bond is cashed-in after ten years there will be no capital gains tax to pay. Education Bonds are also very attractive as you would have the possibility of getting the 30% tax back if the proceeds are used for Educational purposes. Other products are managed funds. These would have capital gains tax to pay when cashed-in however, they will have no tax taken out of them on the earnings. You would pay tax on earnings by adding the earnings to your current taxable income. Again, franking credits on some of the earnings could waive some or most of the tax payable on this income. I would recommend seeing a financial adviser who would be able to explain the pros and cons of each of the above mentioned investments.

Q. My mother is in aged care. She has been there for three months. She has become very unhappy as she misses her own home. My sister and I are worried about her and we are thinking of taking her to our own homes for small periods of time. Are we able to do this?

A. I think that you need to ask the person in charge at the facility whether this is a possibility. Normally as long as you continue to meet any ongoing costs this will be fine. It depends also on the amount of care that is given to her. She obviously moved into the aged care facility because she could not manage on her own, however living with you and/or your sister may be a possibility. If she moves out of the facility permanently, she may not be able to go back in. This needs to be discussed with the rest of the family as it is not an easy move to make.

Q. I am turning 18 and will be buying a car. I have some money invested which I could use. However, I was offered by the car dealer a loan at a reasonable rate of interest. Would it be wise of me to use my own money or should I borrow the funds?

A. I believe that since you have the money you should use your own. You must be a good saver to have, at the age of 18, built enough savings to buy yourself a car. Make sure that you insure the car as accidents can happen. The car loses its value quickly but if you take a loan, you would still need to pay it. So, I would recommend not taking out a loan at all as interest on a loan would be much higher than the interest you are earning on your current bank account.

Q. I am 57 and have just come into an inheritance. I am planning to use some of this money on an overseas trip but will be happy to invest the rest. Should I invest these funds in superannuation or should I invest the funds in a term deposit?

A. As you are 57 if you invested the money in super you will not have access to any of it until you meet a condition of release such as reaching age 60 and retired. I therefore would probably not invest it all in super as yet unless you have a significant sum of money in your bank accounts. There are various other financial assets you could consider such as managed funds, annuities, direct shares to name a few. Seeing a financial planner would be the way to go as they can explain to you the various options in more detail.

By Marie Louise Muscat

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