How to give a newborn ~100K for their 18th birthday.

M

moyjos

As the title says :) AND it only costs you between 12 and 18K

A couple of the girls and I went to a "Wealth Seminar" a while back, and got talking to the accountant after the seminar.

He showed as this technique :)

At birth, get the baby a Tax File Number and pay the baby $20 per week into a super fund.
See attached .pdf

Now OBVIOUSLY this is NOT advice..just a guide, have a chat to your accountant. AND it relies on the current system of co-contributions, if they are not there, it changes.

One friend of mine has a 10y/o who now has a TFN and gets "her" super paid into Mum and Dad's SMSF :) As Mum said to me "Even 8 years or so of her "earnings" will add up nicely"

Any comments ???
 

Attachments

  • How to give your newborn baby.pdf
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Hi,

I like the idea as it does get the co contribution but how would the annual fees of super fund be handled. They may well charge a higher % to manage such a small account.

Just thinking my son does have a SMSF so he could probably investigate this, I shall pass it on.

We never know when /if the govt will stop the benefit but in the mean time :)
 
Not sure about the fees on a small amount. Do we have any super experts here to comment?)

I agree it would work MUCH better if the kids were added into your own SMSF. (and you get access to the extra $$ )
 
I don't see how this would work. Anything inside of super cant *usually* be accessed until the conditions of retirement are met. So it's all well and good giving them 100k on their 18th birthday, they just won't be able to access it until the age of 60 or of they meet a requirement to access their super early such a TPD.

So unless the point is to help your kid in retirement thr money would probably be better used outside.of super.
 
moyjos said:
At birth, get the baby a Tax File Number and pay the baby $20 per week into a super fund.
Click to expand...

It's a great strategy but it won't be giving anyone anything for the 18th birthday. As it's through a super fund, the child won't be able to access the money until they're 60.

The good news is they'll probably collect 5-6 million at that point. Their retirement will be assured.

If you want to give a child that kind of money for their 18th, use an insurance bond listing the child as the benificiary as the investment vehicle instead. There's some interesting strategies you can adopt as part of this to get a similar (and tax free) result, and get yourself some tax deductions along the way. It works fairly similarly but there's no government co-contributions to boost the fund.
 
Id be just opening some kind of account in your own name and if they
turn out ok as a person at 18 give it to them then.
If you have trouble with the little blighters growing up reward yourself.

A lot can happen in 18 years.
 
:) I think the idea is to get a good nest egg into the kid's super that will perhaps be enough to warrant a SMSF that they can have more control over.

It would work whereby the $$ goes into Mum and Dad's SMSF then at 18 the family goes out and buys jr their first IP :) with jr's 100K

Can anybody tell me...if you buy an IP within SMSF can you access any equity before reitrement age? (eg buy an IP for 300K wait a couple of years new value $350K can you pull say $20 in CASH?? )
 
nww said:
Id be just opening some kind of account in your own name and if they
turn out ok as a person at 18 give it to them then.
If you have trouble with the little blighters growing up reward yourself.

A lot can happen in 18 years.
Click to expand...

Lousy returns which are fully taxed. An insurance bond vehicle lists the child as a benificiary but you're still the owner and can change the benficiary at will.

A savings account is really only a 1-2 year timeframe strategy or a place to 'park' money. Over an 18 year timeframe, just about anything else is better.

Can anybody tell me...if you buy an IP within SMSF can you access any equity before reitrement age? (eg buy an IP for 300K wait a couple of years new value $350K can you pull say $20 in CASH?? )
Click to expand...

No, equity belongs to the super fund, not you. Once the money goes in there, you can't access it until you're 60, or in extreme circumstances. This is also why you don't usually purchase income protection insurance via super. The insurance policy will pay the super fund, but the super fund won't pay you.

You can use the equity in the property to purchase a second property in the super fund, but you can't access the equity as cash under any circumstances, so the two properties will be cross-collateralised.
 
What a good looking baby! must take after his grandma! Cait is thinking of making him the poster boy for her baby range later this year.

and thinking about paying him for his image!
 
joanmc said:
What a good looking baby! must take after his grandma! Cait is thinking of making him the poster boy for her baby range later this year.

and thinking about paying him for his image!
Click to expand...

Hehehehe yes isn't he just gorgeous!!! Looking forward to seeing some more pics :)
 
'Here's some money. You can't touch it for another 50 years.' Don't see much value there.

Surely it would be easier just to include the child as a beneficiary on a family trust, use their tax free threshold of about 3k a year, then when they're 18 pay out the loan from the family trust.
 
In my view, it is a very poor strategy. It doesn't make a lot of sense at all. As a number of people have pointed out, there are plenty of other strategies that make a lot more sense.
 
As often is the case with these strategies, it's better than nothing, but you can do better. If that's the only strategy you have, then it's worth doing only because the alternative is worse.
 
PT_Bear said:
You can use the equity in the property to purchase a second property in the super fund, but you can't access the equity as cash under any circumstances, so the two properties will be cross-collateralised.
Click to expand...

Can you? That is not how I read it.

The borrowing can only be to acquire one asset and can only be refinanced to replace the loan not increase it.

http://law.ato.gov.au/atolaw/view.h...recourse borrowing arrangement - refinancing;

http://law.ato.gov.au/atolaw/view.htm?locid='PAC/19930078/67A'#67A
 
It seems to me that this strategy was touted purely as a way to cross sell the seminar to people who don't know any different. If he had tried to sell this to me, the first question I would have asked him was 'How does an 18 year old get access to their super without satisfying a Condition of Release?'
 
ROFL - I don't even contribute toward my own super (I have $1,232 in there at the moment)!!!! :D

We are looking at investing a small amount of money (say $1000 each) for the kids in bank shares, with the dividends franked. Not to give the money to them, but to help pay for their university or other such costs when they are older.
 
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