Hello Vanessa,
Like many my age, it pains me to see my children struggling financially. I’ve been exploring the idea of giving them an early inheritance, something to help them buy a starter home.
This is a subject I know next to nothing about. Obviously, I want to make sure my own financial future is secure before I do anything. Is there an official process for this, or do I just have to transfer some money?
Bearing in mind that I am only going into this as I am separated from their father.
Alice
Send your questions to leading money teacher Vanessa Stoykov floringafter50@dailymail.com.au
Leading money expert Vanessa Stoykov (above) says Alice should map out her future expenses, possible lifestyle changes and any safety nets she wants to keep before giving her children an early inheritance
Hello Alice,
It’s hard to watch your children struggle financially, and many parents choose to help their children get into the real estate market with an early inheritance. It’s a generous step, but you’re right to make sure your own financial future is secure before you do anything. Balancing both is key.
An important factor to consider is making sure you set aside enough money to not only support yourself in retirement, but also enjoy life with your children. Whether it’s travel, experiences or just to help with smaller, everyday expenses, maintaining your financial independence allows you to stay flexible and enjoy your time with them without worry.
When it comes to donating money, especially if you have an age pension, there are limits you need to consider. You can donate a maximum of €10,000 in a financial year, with a maximum of €30,000 over five years. If you exceed this, Centrelink will treat the excess as part of your assets for a further five years, which may reduce your pension rights. Planning within these limits can help protect your income.
If you don’t have an old-age pension, you should still plan for the long term. There are rising costs associated with healthcare, housing, and even unexpected expenses that can quickly add up during retirement.
So before you commit to donating a large amount, I encourage you to map out your future expenses, possible lifestyle changes, and any safety nets you want to keep. By making sure you’re financially prepared, you can give with confidence, knowing you won’t be jeopardizing your own safety or enjoyment in the years to come.
You can also consider spreading the gift over a certain period. This way you can still provide meaningful assistance without transferring a large amount at once. It also gives you the chance to adjust your financial situation as life progresses, giving you flexibility if circumstances change for you or your children.
Accredited financial advisor Shayne Sommer, of Shadfords Financial Group, suggests that Alice should also consider the purpose of the financial gift and the timing of the transfer
Another thing to keep in mind is that helping your children doesn’t always have to come in the form of a lump sum or a deposit on your property. It could support them through smaller, ongoing contributions that ease their financial burden while still giving you control over your own financial situation. For example, assistance with education costs, medical costs, or other targeted support can be just as meaningful, while also allowing you to keep your long-term financial goals intact.
My friend, certified financial advisor Shayne Sommer of Shadforths Financial Grouppoints out that while many parents are eager to help their children enter the real estate market, once you transfer the money you lose control over how it is ultimately spent. Before donating the money, she suggests considering the following:
Purpose of the gift: Decide if you are comfortable with your children using the money for an investment property, or if you would prefer it to be used for a home in which they will live. This ensures that the early inheritance is in line with your intentions.
Time of transfer: You may want to wait until your children can demonstrate that they can manage loan repayments or have saved more for the down payment. This way you can be sure that the money is used for what it is intended.
Shayne also addresses a common concern that parents have: the risk of a relationship breakdown if the property is jointly owned by a partner. One way to protect the money is to give it as a loan rather than as a gift. If a relationship breaks down, you can call back the loan to ensure the money is returned to you, likely through the sale of the property, rather than being split up in a divorce.
You also need to consider the emotional side of giving an early inheritance. It’s important to communicate openly with your children about what this money means, both for them and for you. Setting expectations about how the money will be used can prevent misunderstandings and ensure the gift is appreciated as intended. By having these conversations in advance, you can avoid complications later and ensure that the gift supports both your children’s goals and your own financial well-being.
Ultimately, you want to find a balance between helping your children and maintaining sufficient resources for your own financial security and enjoyment. Seeking professional financial advice can also help you make these decisions and ensure the best outcomes for you and your family.
If you want to learn more about managing an estate and having these important conversations, take my course Why we need to talk about inheritance delves deeper into these topics.
I wish you all the best and we will send you my book for free, because it is the question of the week.
Vanessa
