How to help your children without harming your retirement

Sometimes it pays to think outside the square when wondering how you can help your adult children and at the same time protect your own enjoyment of your retirement. I’ll use a case study to explain this further.

Case study

Sam and Penny are 63 year-old retirees with two adult children. Both children have their own families and one also owns his own business. Sam and Penny wanted to give their children’s finances a boost now, while they had young children and needed help, rather than on their death.


Although Sam and Penny were keen to help out their children, they also wanted to keep the money in the immediate family (protected from in-laws and creditors).

In addition, they wanted to make sure their grandchildren were protected financially, in case something happened to their parents.

They had seen friends having to take over raising grandchildren after the death of a child and saw the health, social and financial effects that had on their retirement, so they wanted to put some protection in place.


We facilitated private loan agreements giving each of their children $100,000 to use towards reducing their mortgage debt. The loan required a minimal amount of interest to be paid yearly and no principal, but it was enough to confirm a valid contract was in place. It cost $100 for each completely valid loan agreement

Importantly, if one of their children splits up from their spouse or their son’s business goes under, Sam and Penny can call in that loan, protecting their money from any family settlement and / or creditors. They can then later re-gift the children back the money when appropriate. (I know this sounds harsh, but they had worked hard for their money and wanted to see it benefit their own children.)

Sam and Penny also set up an annual $1,000 super contribution (non-concessional) for each of their children, and their spouses, on the condition that it would be used to fund life, disability or income protection insurance. As an added benefit, the families also received additional funds from the government co-contribution scheme, which enabled better cover to be purchased on level premiums.

These contributions ensure that Sam and Penny’s grandchildren are financially set up if something happens to their parents. This strategy also protects Sam and Penny’s nest egg, because their grandchildren won’t need their financial support if the worst happens.

They are perfectly happy to step in, if needed, to care for their grandchildren, but they have seen what the added financial worries did to their friends’ health and want to ensure they don’t suffer likewise.

The benefits of Sam and Penny’s strategy

  • Helps their children get ahead
  • Protects the family’s money from ex-spouses, de-facto partners and creditors
  • Protects their grandchildren’s education and lifestyle
  • By locking in level premiums at a young age their children will benefit from lower premiums for life.
  • Keeps their own nest egg intact for their retirement and provide a safety net.


There are ways to pass money to your adult children while protecting it from loss in the event of relationship breakdown.

Sometimes offering funds to insure your children is a far more cost effective way of coping with tragedies protecting everyone’s financial future.

This article first appeared on Women in the Black.

Liam Shorte is Principal of Verante Financial Planning in the Hills and Hawkesbury Districts of Sydney.



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