How do we ensure our son doesn’t fritter away his inheritance?

We are downsizing and wish to give each of our children a $30,000 gift after settlement. We are concerned that our son may fritter away this windfall, and we would rather it went into his superannuation, as he doesn’t have a very large balance at the age of 40. What is the most effective way that we can ensure that it boosts his super?

This is a wonderful opportunity to give your son an invaluable education about money – a lesson that will benefit him for life. Superannuation is an ideal choice because the money will be locked away until he reaches 60, ensuring it won’t be easily spent.

Putting your inheritance somewhere it can’t easily be accessed – such as superannuation – could be a good move.Credit: Simon Letch

To make the most of this, it should be done in the most tax-effective way possible – as a tax-deductible concessional contribution, assuming he has taxable income to offset the deduction. The annual limit for these contributions is $30,000, minus whatever his employer contributes each year.

For example, if his employer contributes $10,000 annually, you could contribute $20,000 this financial year and then $10,000 next year to stay within the cap.

The more involved he is in this process, the more he’ll learn about superannuation, tax benefits, and the power of long-term investing. This isn’t just about securing his future financially – it’s also about equipping him with the knowledge and confidence to make sound financial decisions for the rest of his life.

My husband (74) and I (71) own a holiday house purchased in 1988, used exclusively by our family. If sold now, it would trigger significant capital gains tax. We’ve kept records of improvements but have no plans to sell, as the property is willed to our only child.

Would she face capital gains tax if she inherits it? She plans to keep it for her family. Should she obtain a valuation at inheritance? Would any future capital gain be calculated from the date she inherits, allowing her to start fresh without liability for our accrued capital gain?

Your death will not trigger capital gains tax – it will pass any CGT liability to your daughter and will be payable only if and when she disposes of the property. Therefore, you do not need a valuation of the property at the date of your death.

Would you please give me your opinion as to the value of investing in Exchange-Traded Funds (ETFs)?

An ETF is essentially a managed fund traded on an exchange, such as the ASX. When you invest in an ETF, you’re not buying the underlying assets like shares or bonds. Instead, you purchase units in the ETF, while the provider owns and manages the assets.

A key benefit of ETFs is liquidity – they can be bought or sold quickly. Their unique structure allows units to be created or redeemed to match demand, keeping prices close to the Net Asset Value (NAV). This differs from company shares or Listed Investment Trusts (LITs), where prices are driven by supply and demand.

But here’s the key: an ETF’s performance depends entirely on its asset class. For example, a volatile ETF might track Bitcoin (e.g., Global X 21Shares Bitcoin ETF), while a stable one might focus on government bonds (e.g., iShares Core Composite Bond ETF) or broad indices like the S&P/ASX 200 (e.g., Vanguard Australian Shares Index ETF).

The bottom line? Liquidity is valuable, but knowing the asset class is crucial – it determines your risk and return.

Conventional wisdom emphasises investing with a long-term perspective. However, as superannuants in our 80s, my wife and I are aware that we may not have time to recover from major economic downturns. We have $840,000 in a self-managed super fund and receive a part pension of $200 per fortnight each. Given the current global instability, would it be safer to shift our investments from super into short-term deposits or annuities to ensure greater security?

Given your ages, you already have more capital than you’ll need for the rest of your life. Furthermore, if the market plunged and your super did drop 15 per cent to $714,000, which I regard as extremely unlikely, your age pension would increase by $9828 a year.

This means you have a built-in income hedge. Having said that, it’s important you have at least three years of planned expenditure in the cash-type area.

I think your main focus should be on what kind of assets you wish to leave your children. When you think in this way, you have a much longer timeframe.

Noel Whittaker is the author of Retirement Made Simple and other books on personal finance. Questions to: [e-mail]

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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