As a trustee for my kids who are receiving money from inheritance, what are the best options to invest their money and what are the tax implications for me as the trustee?

Hi Dan,

This is a common question that most trustees ask.

The best place to invest the inheritance is dependent on the children’s ages and time frame of when they are to access the funds and your risk tolerance.

Typically, if the kids are going to get access to the funds within the 0-5 year time frame for things such as a school fees, funding a gap year, buying a car, deposit for a home then there is an emphasis on income earning investments that generally provides a reliable and stable income with little or no capital growth returns such as cash and fixed interest.

If the kids are not going to get access to the funds for the longer term (i.e. 5 years +) then you could consider investing in assets that have an emphasis on capital growth such as property and shares. These investments are generally considered riskier because their values can fluctuate regularly. Holding growth investments over the longer term increases the chance of achieving higher returns on the money.

In summary, your children may have a number of short term and long term goals. Investing in a combination of income and growth assets will diversify your portfolio (“don’t put all your eggs in the one basket”) to minimise volatility and provide you with a better chance of achieving the kids goals.

The tax implications as trustee depends on the nature of the trust. You should speak to your accountant about the trust structure. Some example of trust structures could be
• Testamentary trust
• Discretionary trust
• Fixed trust
Lastly, some care must be taken in relation to minors receiving income as there are higher tax rates that are applicable on investment income taxed in a minors name.

If you have any further questions please do not hesitate to contact me on 02 9251 5558.

Regards,

Tony Lu
Announcer Financial Planning
www.announcer.com.au
tonylu@announcer.com.au