A family allowance agreement might save your family a lot of money.
Family Allowance Agreement
Why a family allowance agreement? In search of an answer, we spoke to Grant Abbott of LightYear Docs and I love SMSF.
Here is what we learned but please listen in as Grant Abbott explains all this much better than we ever could.
To listen while you drive, walk or work, just access the episode through a free podcast app on your mobile phone.
As usual – please take all this as entertainment, talk to your financial advisers and don’t believe a word we say.
Why a Family Allowance Agreement
A family allowance agreement might make somebody financially dependent on you. There are three reasons why you might want this to happen.
1 – To enable your super fund to pay a death benefit directly without going through the estate to somebody who otherwise wouldn’t qualify to receive a direct benefit from your super fund.
2 – To enable your super fund to pay an income stream to somebody who otherwise wouldn’t qualify to receive an income stream.
2 – To pay a death benefit tax-free to somebody who otherwise wouldn’t receive the benefit tax-free.
A family allowance agreement makes most sense for grandparents providing for their children-in-law and grandchildren.
Grant uses the example where the grandparents pay a portion of the grandchildren’s school fees. And some living expenses, clothes – everything that will then formalise that financial dependency.
The next step is to write a a dependency declaration saying ” I thereby declare xyz as my dependents. I believe they are my dependents because I am paying their school fess, and this and this and this”. It becomes a fairly tight binding element.
That does not mean the Commissioner won’t have a go at it. But with the family allowance agreement and the dependency declaration you have a much better defence.
This is a glimpse of what we learned in this episode. Please listen in as Grant explains this in much greater detail.
Disclaimer: Tax Talks does not provide financial or tax advice. All information on Tax Talks is of a general nature only and might no longer be up to date or correct. You should seek professional accredited tax and financial advice when considering whether the information is suitable to your or your client’s circumstances.
Last Updated on 05 February 2020