Parents and grandparents often have a desire to leave a legacy for their minor children (aged less than 18yr). It is essential that appropriate financial and legal advice is obtained to ensure the minimum amount of tax is paid each year until the child/ren reaches age 18.

By way of example, let’s assume Mrs Smith wishes to leave an amount of $100,000 to her granddaughter, Amanda. Mrs Smith does not seek appropriate advice and when the time comes, Amanda (aged 8 years) receives her inheritance of $100,000. Poor planning and the recent removal of the Low Income Tax Offset for children, means Amanda may have to pay tens of thousands of dollars in tax over the next ten years.

If Mrs Smith had sought appropriate financial and legal advice, this tax could have been reduced considerably and possibly eliminated. This could have been achieved via a testamentary trust or the superannuation system.

Unfortunately, many individuals choose not to seek advice because they are not aware of the potential consequences and pitfalls of the DIY approach. For the sake of avoiding the cost of obtaining advice now, some minors are missing out on substantial tax benefits in the future. The only winner in this situation is the Australian Government / Australia Taxation Office!

Why not seek advice today to make sure your loved ones are not going to be left with an unnecessary tax bill.

Owen Hodge Financial Planning can be contacted on 02 9570 7844.

General Advice Warning: This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.

Disclosure: Ben Graham is a representative and Director of Owen Hodge Financial Planning Pty Ltd (ABN: 25 166 817 380) which holds an Australian Financial Services Licence #412370.

When it comes to investing, people can invest their time, their resources, and their physical energy into any number of things. However when most people think of investing, they immediately think about their money. So, let’s ask the question.

Where do you invest your money?

Everybody will invest into something – Do you invest your money into holidays and experiences, or it is going out with friends? Or it could just be the basics of life, food and accommodation.

However, generally speaking there will be money left over for a ‘rainy day’. Since the advent of personal superannuation and the introduction of the governments’ compulsory superannuation contribution, more and more people are putting money aside for the long term. The most obvious question to ask is why invest in the first place? Isn’t it easier to put the money in the bank or even under the bed?

Putting money under the bed is not a very good idea. Unfortunately all economies have something called inflation. This means that the value of cash erodes over time. Putting your cash in an environment where it is not subject to any growth, means that theoretically the buying power of that cash is less tomorrow than today. So, it is important to put your money in an appropriate environment where it has the potential to grow above the rate of inflation. How do you do that?

History has shown over the longer term, investment portfolios containing growth assets such as shares consistently outperform portfolios containing only cash. [Russell Investments]

So, why do we invest? To ensure your money has the best potential to earn returns higher than inflation.

Financial advice is a funny thing. Everybody has an opinion but whose opinion should you trust?

Are you prepared to pay a ‘professional’ for advice, or do you think that Joe Blow down the road has all the answers?

Financial Planning is a profession that is highly regulated in an effort to ensure quality advice. So, if you have decided you are prepared to pay for advice, the next question to ask is, am I prepared to take the advice given? Just like paying to see a doctor, you need to be open and honest to give the doctor all the information so they can give you the right advice.

You need to trust your doctor, just like you need to trust your financial adviser. The essence of finding a trusted adviser, is in asking the right questions and ensuring that they ask the right questions of you. Some examples of questions to ask your financial planner are:

Are you a ‘Certified Financial Planner”? (In other words, do they hold the highest industry recognised qualification? If you had a medical issue, would you take the advice of a person who had completed first aid training or would you see a university trained doctor?)

Are you aligned? (Can a financial planner who is employed by an institution really provide unbiased advice?)

Are you restricted in your advice? (Sometimes, advisers are restricted with what advice they can provide)

When answering the questions asked by a financial adviser, it really helps to be open and honest. This is critical to ensuring they are able to provide advice that is appropriate to your situation.

So, finding quality financial advice is all about asking the right questions and ensuring you are happy with the answers.