Passing Assets to Your Children During Your Life: Should I do it? 

Many people who are separated from former partners or who become widowed will often choose to remarry or enter a new long-term de facto relationship later in life. It is also very common for these people to have children from a previous relationship.  Many parents therefore often wish to ensure that certain assets pass to their children rather than their new partner once they have passed away. 

There are a range of different estate planning options you can use to ensure your assets pass to your children, rather than a new partner, upon your death. These options can include: 

  • Binding Financial Agreements;
  • Wills, Deeds of Mutual Wills and Statutory Declarations;
  • Family Trusts and Wills with Testamentary Trusts; and
  • Directly gifting assets to your children during your life.

This article will discuss the risks and benefits associated with directly gifting assets to your children during your life. For information on the alternative estate planning options mentioned above please see our website or contact us today. 

Gifting assets to your children during your lifetime can be one of the clearest and simplest ways to prevent a family provision claim. However, it is important to ensure that ensure you will be leaving yourself enough money to live and enjoy the lifestyle you desire. 

 

Benefits:

An intangible benefit of gifting assets during your life is that it allows your children develop financial management skills and, if managed responsibly, can be useful in preserving your family’s wealth for the future. In addition, some parents who are concerned about either partners or stepchildren contesting their estates may choose to gift assets to their children during their life as a means of preventing these people from bringing claims against their estate. 

Although gifting money to your children can assist them in purchasing their first home, paying for school fees or helping them start a business; there are important risks to first consider. 

 

Risks: 

In the event that a dispute arises between you and your children concerning the management of these assets, this might cause you significant financial difficulties. For example, suppose you gifted your investment property to your children and had an agreement that they would pay you the income generated from that property. If you had a dispute with your children, then it is possible that the child might decide to stop paying you the income. This could severely impact your financial wellbeing. Further, if gifts are made unequally between your children this may also affect family provision claims that are made upon your estate after you have passed away. 

In addition, should your children experience a breakdown in their marriage or should they become unable to pay their debts, then it is possible that any assets that you give them might become available to former partners or their creditors. 

If you wish to benefit your children during your lifetime, an alternative option is to pass the benefit by way of a loan. This means that if your children go through a relationship breakdown, you can recall the loan and the amount lent to them. As a result, the money will most likely be unavailable for division in a divorce or separation settlement.

 

Could gifting assets during my life impact my pension?

It is possible that the gifting of your assets might affect your eligibility to receive Centrelink income support. Centrelink rules state that the gifting of more than ten thousand dollars ($10,000.00) within a one-year period and/or the gifting of more than thirty thousand dollars ($30,000.00) within a five-year period will affect your ability to claim a pension.  In particular, where you gift more than ten thousand dollars ($10,000.00) within a given year then you will be deemed to still hold the amount in excess of ten thousand dollars ($10,000.00) for a five-year period. 

We are unable to advise as to what the financial effect of making such gifts would be, however we advise that you instead speak with the Centrelink office and an accountant / financial planner. 

For more information on estate planning options or other legal matters,  contact us today.

 

DISCLAIMER: The information contained in this article is general and is not intended to be advice on any matter. It is for information only and is not legal advice. In the event of a legal problem, you should seek legal advice.

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Yours Sincerely,

The Team,
O’Brien Connors & Kennett Solicitors