This week I celebrated my 73^rd birthday – via Zoom bevvies with the family. In the midst of the COVID-19 pandemic I have to confess that I am getting pretty peeved at the constant references to the apparent characterisation of those of us over 60s as “elderly”, irrelevant members of society, incapable and unentitled to drive an automobile, simply occupying “God’s” waiting room and generally non-contributors to society. Some of those young Darwinian believers of survival of the fittest, espouse the belief that COVID should be allowed to run its course and “cull” the burden of an ageing population. Not a palatable thought for those in the target area.

So, my subject is focussed on the fact that, believe it or not, us 70s plus folk are far from inactive and irrelevant. In fact, I would argue that we are a very active, fit, and creative lot. Most of my peers are into some form of physical activity whether it be adorned in lycra aboard and carbon fibre two-wheeled steed, wearing the latest activewear in the Pilates studio or gymnasium and of course, there are the obsessions of golf and tennis or walking 10,000 steps a day.

The other reality is that retirees are spenders and inject a great deal of money into the economy in many forms, not the least being the assistance of the younger generations to enter the real estate market or educate their children. They love to enjoy the retirement they worked so long to achieve through travel, assisting their families both financially and in the quality of their lifestyle.

I think that the advent of the COVID-19 pandemic has placed even greater emphasis on priority setting in all our lives with an emphasis on family values and national pride.  

So, this leads me into a subject I and my colleagues at Hewison Private Wealth hold dear, and that is multigenerational financial planning and wealth transfer.

Primarily this relates to the preservation of capital wealth through family generations to achieve a better quality of life and reduce dependence on the government purse. This, in turn, benefits those less fortunate who need government support and enables government to pursue the important issues it needs to fund, which contributes to the development of our country for the benefit of all.

The other important benefactor of multigenerational wealth transfer is philanthropic funding such as charitable bodies and scientific development which is vital to our children’s future. COVID-19 has shown us first-hand the importance of scientific development of medicines and cures to protest us from harm. Government funding is not sufficient to drive these important funds, bodies and initiatives, funding also needs to be sourced elsewhere.

The reality is that the older members of the community have lived through the developmental stages of their lives. Having experienced their own education, perhaps raised a family, bought a home, built a career and in doing so have established themselves financially, which now gives them access to wealth. With wealth being passed through to future generations, this financial resource continues to compound, with the right advice and decision making.

What we at Hewison are finding is that it is now very common for our clients to want to assist their children financially, whether it be by helping with the purchase of a residence, their education, or that of educating or developing savings plans for grandchildren. In some ways, clients prefer to gift wealth to their family at the time in their lives when they most need it.

Of course, this all depends on the individual’s circumstances and we always emphasise in our strategic planning the priority is for clients to ensure they can fund their own lifestyle needs. Thus, in developing clients’ strategic plans our priorities are to establish sufficient wealth to achieve specific financial objectives and to have the capacity to generate sufficient income to support the desired lifestyle in retirement whilst continuing to grow capital.

In planning terms, I wanted to touch upon a couple of strategic ideas that I think have great merit for those in a position to utilise them.

Residential housing assistance

As we all know, buying a house is the Australian dream and the major financial event in most of our lives. We also know that this it is becoming more difficult with time.

Sometimes the simple gifting of funds to a child has shortcomings for a variety of reasons and loan guarantees are generally not a good idea.

One alternative is to assist a child by purchasing a residence jointly as tenants-in-common with you treating your ownership as an investment. This would usually be done on the understanding that eventually when the child obtains an income that enables them to stand alone, you sell your share gifting your net equity in the property.

Philanthropy or charitable giving – Capital Gains tax event

One avenue for facilitating charitable giving is the establishment of a Private Ancillary Fund (PAF), which is a trust established specifically for the purpose of distributing funds to registered charities.

In the event of a large capital disposal event, which is subject to capital gains tax (CGT), it may be attractive to establish a PAF and make a capital gift to the PAF which would be tax-deductible. In this way, up to 48.5% of the capital retained by the PAF could be funded by the CGT saving. The PAF would then be managed by the family to provide charitable funding. 

So, let me close off where I began. Have a little compassion for us maturing citizens. We have our uses and are not quite ready for the rubbish heap just yet. We still have a lot of cruising to do!!

John Hewison