Trust fund: Investing in a boy’s future

IN a perfect world, I would manage a trust for a child by investing the bulk of the money in low-cost listed investment companies for the next 15 years, writes SCOTT PAPE.

When divorcing make sure you get proper legal advice.

AMY WRITES: After the death of my aunt and uncle, my mother has been granted custody of her 13-year-old nephew. He has a trust fund worth about $650k. My mother rents, so we are wondering if it is better for the trust to buy a home for my nephew (where my mother would reside until he is old enough) or to have Mum continue to rent and let the trust manage the funds. The earnings on the trust are not great. Any guidance would be appreciated!

 

BAREFOOT SAYS: Your mother needs to talk to the trustee and see what terms are specified in the trust. Generally speaking, the trustee has the power to advance money for maintenance, support and education of the child, but is bound by the terms of the trust. Either way, I don’t think buying a home for your mother to live in is a good idea. In a perfect world, I’d invest the bulk of the money in low-cost listed investment companies for the next 15 years. Not only will the money likely double in that time, it’ll give you 15 years to brainwash him into being a good money manager (including 10 years of adulthood to get the “stupid” out of his system). The end goal would be for him to own his own home outright, and have a healthy share portfolio.

MARNIE WRITES: Recently my partner and I had a meeting with a finance group. Long story short: they said if we move all our money into one account and live off $400-$500 a week, we could consolidate all our debts into a $415,000 mortgage and have it paid off within 15 years. We would have a 5.4 per cent interest rate, but as long as we let them control the access to our cash we would be debt free in our mid-40s. Just wondering if it’s one of those “too good too be true” things you keep talking about.

BAREFOOT SAYS: Yes, it is. It sounds like they’re trying to be the finance equivalent of Weight Watchers — offering to hide the Mars Bars from you for the next 15 years. Come on, wake up to yourself! It’s never, ever a good idea to hand over control of your family’s finances to a third party — least of all to a bloody mortgage broker. There are only two ways to pay off your mortgage quicker: lower your interest rate (and the rate they’ve quoted you sounds high — possibly to pay for their Weight Watchers program), and make extra repayments. It’s simple, but not easy. There’s no magic wand (or Crown) that’ll do this for you long term. You need to do it yourself.

MARGIE WRITES: I’m asking this on behalf of my 46-year-old bachelor son. He has a firm called Iridium Capital contacting him suggesting he can save on tax and pay off his mortgage faster. Can this be done?

BAREFOOT SAYS: I’ve never heard of the company you mention, but the pitch “save on tax and pay off your mortgage faster” has been around since before Kerri-Anne Kennerley was born. To do that, he’ll have to borrow and buy an investment that they (no doubt) are flogging. I’d advise your son to spend more time on Tinder (or Grindr) and less time talking to flashy financial salespeople.

 

TRISTAN WRITES: My wife and I feel like we are treading water. We have no debt, pay $560 per week in rent and have $45,000 split between a savings account and index funds. My mother hasn’t had a job in 30 years and will stop receiving divorce payments from my dad in 2018 — meaning I’ll have to send her around $1200 a month. We want to get ahead, buy a house and take care of our family, but we don’t know the right path.

BAREFOOT SAYS: You should love your mum enough to treat her like an adult, not a helpless teenager. So if you and your wife agree, you could pay for her to see a financial adviser to map out a financial plan. The advice may suggest she has to get a job, or lower her living expectations. You’ve got your own family to look after. Give her all the love and support you can, but cut the freaking apron strings, Tristan.

When divorcing make sure you get proper legal advice.

NATASHA WRITES: I’ve been married 20 years and I’ve never seen my husband’s bank statements. We have no joint accounts. The house, cars and everything else are in his name. But when we buy something like a lounge, he always asks me to pay half (which I do). We are about to separate. He is saying I won’t get much. I’m really scared — it’s a struggle on my own. Our house is worth about $400k, his mother left him $200k, and I have $55k in super and $10k in savings. Do you have any advice?

 

BAREFOOT SAYS: It’s time to kick your husband in the … wallet. Understand that his assertion that you “won’t get much” was coming from a place of insecurity, not informed legal opinion. The law would state that you’ve made a contribution and are entitled to a share of the assets, even if you haven’t worked in paid employment or the assets aren’t in your name. There are three things I need you to do. First, write down the date of your separation (to apply for a divorce you’ll need to prove that you’ve been separated for 12 months). Second, do a financial stocktake. Write down all the assets and loans you and your husband have. Third, take these two documents to a family lawyer. If you don’t have one, talk to a community legal service in your area as a starting point. Whoever you see, make sure you tell them that your husband holds property in his name. Strap your boots on, hold your head high, and get what’s rightfully yours.

barefootinvestor.com

Originally published as Trust fund: Investing in a boy’s future