This is a very personal question and everyone is different.
At one end of the scale you have those that live off the “smell of an oily rag” to pass everything they possibly could onto their children or you have the other end of the scale where they say “I have given them a good education and start in life” so if “I spent my last dollar on my last day on this earth it would be perfectly timed”.
Most people will sit in between depending upon their situation. Usually the biggest asset to pass on when you have lived to a ripe old age is your home. Whether that has been transferred into a retirement village entrance, or is still in the family home this can equate to a large asset to pass on. The issues with this is if one beneficiary particularly wants to maintain the asset but doesn’t have the funds to pay other beneficiaries out. Does the house get sold upon your death and divided or do you have enough funds to even out beneficiaries inheritances with other assets?
Have you talked to your children/beneficiaries about what they would want? Do you have special items you need to specifically make sure are spelt out to whom they are intended; special jewellery or other such items tend to fall under this category.
Death is a subject we don’t like to talk about so tend to brush it under the carpet. I know I certainly don’t want to entertain the thought that my parents won’t be here one day so I pretend it will never happen. Unfortunately, like taxes, death is a certainty at one point for all of us. If leaving an inheritance is important then you need to talk about it and plan for this. To have all your assets other than your house in super may mean you are forced to draw down a certain percentage on your capital which isn’t conducive to passing assets on. At age 90 you are forced to draw 11% of your account balance out of your super each year. There aren’t many assets which pay 11% income and allow you to maintain your capital.
Are you trying your hardest to live off the income to preserve your assets to pass to your children? This is the dream of many, however with cash rates at such record lows it is very difficult to live off the income of your assets unless you have a really large sum of funds. There is a balance, as to your standard of living and what you can pass onto your children.
What do you do if you don’t have people to leave your assets to? Does this affect you? Sometimes premature death can mean you don’t have the beneficiaries to leave your assets. Do you then choose extended family members or friends or charities? What are the implications of leaving things to charities? If there are any capital gains tax applicable on your estate assets, the estate has to pay this before it is distributed.
If you wish to discuss your situation further or have any questions regarding this please give the staff at Ritchie Advice a call, we would be more than happy to help.
This advice may not be suitable to you because it contains general advice which does not take into consideration any of your personal circumstances. All strategies and information provided in this article is general advice only.
Ritchie Advice Pty Ltd ABN 12 150 128 448, is a Corporate Authorised Representative 408050 of Dover Financial Advisers Pty Ltd, Australian Financial Services Licensee No. 307248.
