Most suitable vehicle for intergenerational investing

Yes if a beneficiary were to sell say 100 years later there could be a huge CGT bill. But this would be the case no matter how it was set up, even personal names and then bequeathed to an individual and then to another, the cost base would be the cost base of the original owner.

 

Financial education should include basic tax concepts, and ability to assess advisors. And continuous assessment and actions.

 

I'm confused, my neighbour's mom passed away and they had 2 years to sell the property tax-free, if they choose to keep it, the new cost base would be the date when her mom died; that's what they said their accountant told them - they are in Vic.

 

Yes that is the case - doesn't matter what state they are located in. But this only applies to the main residence of the deceased person. it doesn't apply to properties that were rented out at the time of death for example.

 

when they inherited an investment property, do they need to pay cgt (current price - previous owner buy price)? how can we try to minimize this? buying thru a company?

 

no.

 

thanks for clarifying it up. When they sell 5 years after inheriting an investment property, is the cost base the price when they inherited it or would it be the of that of the previous owner?

 

Generally it would be the cost base of the deceased's unless it was their main residence as of the date of death. One strategy is to move into your investment property, with the highest capital gains, later in life.

Tax Tip 241: Leave your children 2 properties CGT free on death Tax Tip 241: Leave your children 2 properties CGT free on death


Tax Tip 83: CGT on Death and the Passing of Property Tax Tip 83: CGT on Death and the Passing of Property

 

Thanks! you are so knowledgeable. I know you are in Sydney. Is it possible to schedule a paid-for advise on structuring my assets? It would be via email if possible.

 

Yes but booked out atm

 

It's not urgent, maybe it can sit in your queue until u can get to it for the next 1 to 2 months?

 

If it was mums home (or absence) the costbase of mums home is the market val on the date she dies. A further two years for either the executor OR beneficiaries to sell allows any profit on sale in that time to be disregarded. If it was mums IP etc thc then the costbase will be what mum had paid for the property.

 

I've been doing a lot of reading through the threads and while I appreciate the knowledge by all. I still have a question regarding TT.

As a recent beneficiary of a TT received in Cash, am I correct to assume that the only logical investment is in Shares.

The same logic then would say that high Investment Returns are better than Capital Gains as this provides income vs Compounding as the Testamentary Trust cannot hold cash but rather always have to distribute.

 

This is not good English so I don't know if you mean a testamentary trust has paid you some cash or if the TT has receved cash as a beneficiary of a deceased estate.
The trustee is a trust is limited by the deed or the will, or the trustee act, in what they can invest in. Whether it should invest in something or not is a different question which it should carefully consider.

 

Apologies for not being clear the TT received cash as a beneficiary. The deed does not have limitations on investment.

 

Hi @Big A

Just some thoughts for you from our life journey.

When we had younger kids, the thinking was along the lines of this thread and what structures for inter-generational investment and estate planning.

We have an extensive will drawn up by experts which I’m pretty much taking on faith will do the job it’s designed to do if we die unexpectedly, but ultimately its success or otherwise seems to come down to those involved once I’m not around.

As the kids got older my thinking has changed to wanting as little as possible to go through our estate. Utilisation of the next generations brain power, being around to teach and early as possible transfer of resources is now our plan for inter-generational wealth.

Zero interest anymore in structures and tax minimisation. After excess resources have been passed as early as possible to next generation, we will just have assets to meet our personal needs held in our own names, a SMSF and a will I may actually be able to fully understand.

Things change. Nothing works very well as complete set and forget. An endowment to a future brat multi generations removed that you will never know, who receives it purely by luck of birth…………..what do you really want when you think inter-generational.

Happy planning.

 

Not really. Personally I like shares but there is no reason why you couldn't invest in different assets. But as Terry W said that's something you need to give consideration and decide.

This doesn't make sense. Just to be clear I am not an expert in this field, but high returns which I assume you meant higher income paying assets VS growth assets has nothing to do with the fact that a trust can not hold cash. Income must be distributed each year and can not be kept by the trust or else there are undesirable tax consequences. That doesn't make having high income paying investments any better or worse. It depends on your personal situation. Do you need the income and will the TT deliver beneficial tax outcomes due to having beneficiaries for distribution purpose that will result in low or lower tax outcomes? You know what's better from a tax minimization point of view for investing if you don't need the income to spend? Growth assets. You don't pay any tax on growth until you decide to sell them. Then there is also benefits such as capital gains discounts that you get when you sell growth assets after 12 months of ownership, which you don't get on normal income. Everything I have said though is very general and their is much more to it than this.

Point is without knowing all the facts and your personal circumstances it would be hard for anyone to point you in the right direction. Not withstanding the fact that you should not be making decisions of this magnitude based on forum members opinions. Take all the info you collect here and go get a professional to guide you.

 

My plans have changed as my kids got older and started working. I know they can take care of themselves now

 

I think your concept of keeping it all together a great concept.
Grouping all the investments together will give it financial strength and the ability to create a massive portfolio.

 

Thanks for the feedback, there is more to learn here.

Will definitely be reaching out to a professional because I know that the initial steps are very important for the best outcome for the life of the Trust.