Hello, and welcome to the Australian's Money Puzzle podcast. I'm James Kirby, Welsh editor at The Australian. Now welcome aboard of your body. My guest today is a special guest, a special guest with a capital G. He is quite simply the doyene really of personal and finance investment in Australia's author of many financial books, including Making Money Made Simple, which is I would reckon on just about every shelf of every home that anyone whoever really wanted to get
a grab on how it all works. I see it's in twenty He's had twenty five editions of that book, which has got to be a record. It's of course no Whittaker, and I'm delighted to have him on the show. He's just produced his latest book, which is called Will's The Death and Taxes Made Simple. I know, how are you, hi, James.
Great to be with you. I've been a great fan of your podcast for a long time, so it's great to talk.
Oh, thank you very much, Thank you very much. Well there you are. Mutual admiration Society of two straight away. But they tell me about the Yeah, Making Money Made Simple. I presume that's your biggest seller of all the books, is it. I'm only guessing yes.
I would think so when so many people call it making money made easy and there's no connection between simple and easy. It's simple, but simple need not be easy.
We have a joke basically inside the Australian now that we can see so easily how stories perform and all that, and you can measure, you know, how many people read it, how long did they read it for et cetera. If we have a joke that, like in personal finance, if you if you want a story to go really well, all you have to do is put a headline on it which says like how to make a million easy, and it will always be read because there's always this demand,
isn't there. There's always this uh, misapprehension. I suppose that you can make money easily or without taking a risk or without thinking about it, and I think that's something that you've always worked on and challenged really but at the same time as you say it can be done well.
Look, I've never been one for sensational headlines market right the headline market's about to crash.
Yes, and it would do well. No, it would it would do well.
Yes, we do very well. But the whole thing about making money is it happens slowly and compoundies is the secret. Compounding slow to start and gets faster and faster as time passes. I tell the story of the lily in the pond that doubles every day and fills the pond in ten days. How long to goo from quarter full to full? The answer is two days, quarter to half
on the ninth, and half fall to fall on the tenth. Now, if that ten days is your investment time frame, and you because you start late or cash early, if you've only got eight days, you miss out on three quarters of what you would have had. Basically, investment, it's all about time in.
And I suppose the corollary of that is to start as soon as you possibly can always.
I spoke to Blake last week. He's now worth about four hundred million. He said, I was in school at fifteen and you came and gave a talk to the kids, and you talked about compound interest, and that was life changing for me.
Yes, it's something I think that's even more relevant now with property prices, where perhaps earlier generations it was a choice, would you like to be wealthy. Would you like to make money? This current generation, it's like, if you want to buy a house, you have to make money, you must make that deposit. It's become more compulsory, or at least mandatory. I think for this generation than your generation or my generation.
I think, well, well, I think back about nineteen seventy five. We were building houses and the house was thirty thousand dollars in Brisbane, a low set brick network two years income, and people borrowed money at fourteen percent. The same house is ten times dearer at eight hundred thousand dollars. So they've just got so much more expensive in real terms. That's the problem.
It's the problem. I I'm want to talk about your book in a second and the issues. I said, I'll ask you one quick thing if I could. Had a guest on Tuesday, Duncan Perkins, an accountant who was very good, and we mentioned on the show that you were coming on today, and he said, Noel is very skeptical about investment property and that he certainly was of the impression that you believe that in terms of making money, there's a lot of easier ways and more reliable ways than
investment property. Our shows on Tuesday tend to concentrate on investment property. Is that your sort of disposition.
It's been my experience times.
Right.
I'm sold a property for seven hundred thousand, which cost me two hundred and twenty thousand in two thousand, that's twenty four years. My money in shares would be worth in the index, which will be worth one point five million dollars. Now I solwed this because I got sick of it. I had to sell it. Now I'm going to pay one hundred thousand capital gains tax that would have been in shares. There's never a need to sell. So if you've got property, you need to turn it
over and make it better and improve it. And that's got massive costs, plus the land tax and the rates and the insurance. You buy an index fund which requires no decisions and your set and forget. It's done nine percent total for one hundred and twenty years. It's hands down the best.
Right, Okay, But I suppose you you would allow that every property is individual and there will always be individual properties always.
But the thing is, there's no such animal as the property market. There might be point Piper and cans and madeer and perth, you know, and some are going well and some aren't. About shares, you can start with bug roll anyway, that's the great thing bout shit it is.
It is absolutely okay, terrific. Now, let's talk about your new book, which I can tell you like everyone else, I'm only human. And it's many people have asked to come on the show and talk about wills and estate planning, and I have resisted it because I think someone has to be very good and very articulous to actually make it interesting. And you've just done this book on this whole area, and you have a couple of things you really a couple of points I know that you really
wanted to make. One was about to review reviewing your will regularly. If you don't review your will regularly, it doesn't become non and void.
Now, it doesn't become null and void, but it might be out of date. I mean, since you might do well. Most people might be will at age forty eight. The reason is that's when their parents are writy and they're thinking about the inherence. You know. But you may have extra kids, There may be relationship breakdowns. One of your kids might have got divorced, there's also you may have changed houses. It's important that your estate reflects the circumstances
of the time. That's why we say at least every three or four years review you will, but don't forget to you. It's four specialties a state planning is law and tax and superannuation and all the financial planning stuff such as age care. So it's a multi dissamer area.
Yes, every four years is your recommendation.
Well, not so much. That's so much every time there's a change of circumstance.
Yeah, yeah, or life major life events. Major life events, I mean very obvious ones, being a divorce for instance.
Okay, all the parents' death, you know, or parents to age care. Also, these days, people are living longer and all the relationships are becoming more common. There's two couples and one partner dies in each and they re partner and that's a whole new ball game. Again. They want to keep their money for each side. They don't want it intermingled.
You're right, Okay, So let's say that happens. Then what would be the pathway for that in the case where the couple remarried, where the two individuals who were left widowed, if you like, remarried, and they came to you or someone like you, what would your advice? What would your advice be?
Well, first of all, people don't understand, but you can have a house as joint tenants or as tenants in common. On death, joint tenancy automatically goes to the survivor, and that's the way most young couples hold the house. But if you're a second relationship, as normally tenants in common, so you could individually leave your share to your inside. There's also a trick. Let's say that a couple marry and they resource her and little bit out of balance, and say that she gets sick and needs to go
to a nursing home. He pays the half a million dollars for the bond on her death that goes to her estate automatically. So who's a state is missed out on half a million dollars. Now, the way around that is he makes a line to her of half a million dollars. Problem solved. It's easier to solve a problem in advance.
It is, of course, yes, a clearness I wanted just on that whole area. And it's a difficult area, of course, it is. And age care and aging of Australia with a huge issue, and finally some breakthrough in recent times about each care which cut to the chase. Basically, people who are self funder retirees may end up paying about nine thousand dollars more works then they might have been under the old regime.
And age care is the most complex topic I.
Know, yes, and it's a it's difficult. I mean it's difficult for everybody, the including the sons and daughters of the person, who are only human and in making decisions financially for their parents. Only someone with no emotions that all could could separate the fact that their inheritance is shrinking basically on the basis of some of the decisions they might make in relation to age care. That's that's
something that everybody has to face. One of the things you bring up during powers of attorney which sounds could you first of all explain what that is? And I just want to explain also I want to bring up the point then as to it sounds great, but what if the person says.
No.
If the person says yeah, when it comes to that stage that I have lost my capacity, I'll sign it. But of course it's to late them. I bet it happens all the time, but could you expland what the joint powers of attorney is and the issues around that.
There there will be a time in most people's lives when they don't have capacity, and therefore the enduring power of attorney exists as long as they are alive. Many people think it survives thee deceased, and it doesn't. Many widows have rushed down to the bank with the document to be told it doesn't work anymore. But I stress in the book you need to rehearse it now in case reasons. I heard about woman was a widow, two
kids had the endearing powers of attorney. They go to the bank to withdraw five hundred thousand for the bond. Bank says a power of attorney is not valid because the kids signed before the widow and the document is giving power. So those who accept the pair can't sign before the giver said, simply solved will get the attorneys to resign. Banks, says I I one quite accept that, and that they go to the court because banks can be very difficult, extremely difficult.
Just just backtrack for a second. So during powers of attorney, it's a situation where For instance, I have a very old parent and that very old parent, or I or anyone like me has a very old parent, and we know that parent is fine, but we also know that in whatever the three or four years time they're going to the statistics would suggest that they're going to find it too hard to pay their bills, to manage things,
and signed documents. So as a preemptive measure as a defense for them, to help them and to help the family have all this done properly, the present suggests, Hey dad or hey mom, there's a thing called enduring power of attorney, and if you sign it, it means that I'll be able to manage your affairs for you on your behalf should you lose capacity. Now, that's the enduring property what But how often do you think they work and how often do you think the older person resists?
Well, I think the older person is usually amenable to it. The trouble is when you try to use it, if the bank doesn't accept it, or worse still, if you can't find it. I heard about a guard headed the will, the power of attorney and the advance Health Directive and put them all in the safe and the kids needed the court order to get them. So those documents need to be available.
Okay, so what's the perfect way to do it.
Well, you need the documents and your family should know about them. One of the things to be covered in the book is a lot of people now prepay their funerals because you can pay fifteen thousand, five hundred dollars a big exempt from Santlowick. It's a good age pension strategy. But it's too late when you're all in church to find out that you've prepaid a different funeral director. But very important the kids know if it's a prepaid funeral,
who's got it? I hear time and time again. Ah. We went through mum's stuff and all the things we found you couldn't believe it. One person said all the books were full of banknotes.
Yes, at least with banknotes you don't have to seek anyone that say advice about how to access them. Okay, here we'll take a short break. I'll will be back in a moment. Hello and welcome back to The Australian's Money Caused podcast. James Kirby here talking to Noel Whittaker, the author and finance commentator. The original of the species folks.
Long before many of us, including myself, were on the scene, Noel really was guiding light and how to do this and how to talk to the general public about specific financial issues. And you must remember today we've got podcasts and a lot of coverage in newspapers, et cetera. But there was a time when there was very little. You had to be quite wealthy to get advice. You need to be quite wealthy to even use a stock broker, and people like Noel really broke the mold in this area.
No one of the things that you mentioned about in terms of and it's hard to there's only so much we can cover today. But in the past, wills were everything, right, the will was the big thing. Yes, Now enormous amounts of money are now in super and we're compulsory super. There's a whole generation coming through where you know, outside of the family home, most of the money might be in super. There mightn't be anything really but talking about
outside of super. If they put all their money in super and then after they pass on, it's all about how the super is passed on. Can you give some information about how that should be done properly?
Well, the first big issue James is you will does not determine who gets you super. The trustee of your fund is the person who decides who gets the super. They can do a binding death benefit nomination that tells the trustee what they got to do. But I think the big dang is the death tax. Now most people don't understand the death tax. Now, your super has a taxable component that's contributions and earnings, and the only exempt component is stuff you've made from your own after text
dollars out. That's fine enough lift to a dependent and your partners all was dependent. But if that'st lift to a non dependent as a seventeen percent tax on death.
So just for the listeners, just to clarify on this one people, nowadays, the amount we're paying in compulsory super, for most people, it's so much that it's all they
put in, right, They don't volunteer anything else. And so what you're saying is, let's say for the average Australian in twenty years time, their super will be made up probably I don't know, eighty or ninety percent will be compulsory super that was put in by law, and that money that should they seek in the future to pass that on to what we call an adult dependent there's a tax on that. It's seventeen percent. Is that what it works out?
I know thereabouts it's non dependent MEDICALLYBIA two plus fifteen percent. Like I just say one thing there, They balance will be probably thirty percent contributions and seventy percent earnings, because as the balance grows, the contributions form a smaller component. But that's all.
Taxable, yes, so okay, oh fair enough. So it's the contributions. It's that pillar, if you like, the core of the contributions that we're talking about here, and the earnings and the earnings on them, which is the vast most of the money. I spose is it?
Sure? Say be what a half million of super there's eighty five thousand dollars potential death tax on that. Now there's ways around it.
There is ways around us, and they're completely they are almost daft. I think they're such a sort of a circular thing. But basically what you do is you take the super out and your recontributors. Is that right?
Yes? But that yes true? So once you eat sixty you can take your sleeper out of tax free and you contribute to a seventy five, so you could take if you're balance half a million dollars, you could take out three hundred thousand now and put it back. But don't forget, the earnings are still taxable on that, and you can't specify which part you withdraw. So I've got a say eighty percent taxable and twenty percent non taxable,
then the withdrawals will be in those proportions. The best solution is to have your attorney instructed to withdraw the money when your death is knee tax free and put that in your bank account.
Yes, do many people do that.
A woman rode to me this week, sorry how her daughter around dad died and the instructions were to go straight to mum. Mum died three days later. Now Australian super were not prepared to pay the benefit to a dead person, so the whole state copped the seventeen percent because mum died so fast that there was no time. Don't forget, if you're dealing with big funds, it could take six months to get the money out, is that right.
I know they're notorious for their delays and their and how slow, and probably it's probably one of the selling advantages under underestimated advantages of self managed super funds. But absolutely you don't have to deal with all that. But just on that, I just one last thing on that. I know in principle it sounds terrific, but how often can a family member, in good faith persuade someone who's literally close to deb to gift all their money. I mean, it would be a diplomatic no.
It's going to the member's bank account. So I've got a million dollars in seper say the attorney takes out my million tax free and puts a million dollars in my bank account, and then the will takes over.
Yes, yes, okay, I guess it. But still do you think it's common that people actually go through that process?
Well, they don't get around to doing it, that's the whole problem. And then, of course, when the guy's close to death, they're soel traumatized about is amcamming if they still don't do it.
Of course, that's right. It's very hard to talk about things like that at that time. Of course. Okay, one last thing, one last thing before we go to questions, and we're trying to squeeze in a lot here. But about executors, I know you the various points you want to make, But I want to say one thing to our listeners. If someone asks them, would they be the
executor on their will? I have heard absolute horror stories of people who very casually said of course, and ended up being the executor on two or three different wills and found themselves in the middle of ferociously feuding families. Is there any advice you give two people about the whole business of being an executor?
Well, I think the executive stands in the place of the deceased, and I think if you're making a will, you've got to make sure the executor is a person who can do that. Now, that's pretty okay if you've only got a house and super but if you've got to say, maybe rental properties and commercial property and stuff, there's big decisions to make. In the book, we talk about the case for kids and two want to keep the family home and too don't. One saying month's promised
we could mortgage the house for my business. The other says no, And then the executive's got to adjudicate. You know, I'd be very loath to accept anything as an executor.
You'd be you'd be very low to accept the task in itself with being an executor. Either, do you think the person should be a lawyer?
Well, well, there's lawyers will do it for free. But in my own case, I found that old well i'd made fifteen years ago. Was I reviewing the current will and the people I'd chosen as executives, I would never pick now, Well, one turn out to be a dreadful stock picker, one is now too old, and one's deceased. That's why in keeping the will up to dates important. But I also like to say we stress, don't rush. I hear time and time again. Dad died. We rushed
and told the bank. They froze the accounts and we couldn't pay for the funeral. You don't need to rush and tell the bank.
Is there a legal requirement about how long you can not there?
But the other big one is most couples exist on the husband's superannuation pension. Now he dies, they rush and tell the fund freezes the pension. It can take a year to revive it. That's a major problem. And also a big issue is most people on the age pension leave their assets to each other. Now the couple's cut off points about a million when the single cutoff points
about six hundred and eighty thousand dollars. So if you've got eight hundred thousand of assets and you're getting your part pension and all the benefits, then the husband dies and the widow gets all the money, she's over the limit and she loses the pension, all these things that are so important that and they're all talking about big dollars. I mean, these mistakes cost a lot of money.
Yes, but what could the person one last before we go to the big what could the person do? I mean, in a way, there's a justification to that. They've just picked up a whole pile of money. They don't need attention as much as they used to.
Well, yes, but as much simpler. I always believe the same saying that you give with a warm hand. When Bill and Mary are doing their will, they could decide which kids to leave the money too, and I could leave three hundred thousand dollars to the kids and Mom would still have six hundred thousand, still get the pension.
Okay, yeah, just the basic clever, cool, calm assessment of the numbers. Very good. Okay, Hey, we'll go to questions. Well, take a show break and we'll come back and try and get no to do two or three questions from our listeners back in a moment. Hello, welcome back to The Australian's Money Puzzle. I'm James Kirby talking to No fight occur, Okay, no, we'll try. Well, just tye two or three of these. David says, I'm moving my super
from a wrap account to an industry fund. I want to ensure that when my accumulation faced super changes to accompa's pension within the same provider, it doesn't trigger a CGT event. However, reading all the documents, I can't see a clear answer to the question. People are always worried about that moving money and losing the CGT. You're having to pay tax in some fashion.
It's the main point, James, is their insurance with his present fund. If there is will the new fund accept the insurance because you can't transfer it.
Oh, you can transfer your money, but you can't transfer your insurance.
And one of the lawyers was telling me that they're acting for a person. He had five super funds. Wife Amalga, bade them to save fees because he had cancer, was dying and she closed the one fund that had a four hundred thousand insurance in it, so they lost to four hundred thousand death benefits by moving funds. So the first thing is that by moving funds, is insurance an issue?
Because if you move the fund and the CGT is the CGT is clean. I presume that's not an issue in this case.
And say that I can't say there's any issue with keptain.
Yeah, I wouldn't have thought so, by the way, David, and if all the David's out there, this is never advised. This is information only. But here's the point that Noel is making. If you're choosing between insured super funds, be very careful on the insurance because the insurance doesn't transfer with you, and when you go to the new fund, they're going to make you take all the medical tests
again and fill out all the forms again. And the chances are you're probably not as healthy as you were when you signed it the first time, and so your insurance would go. What would that be the issue?
Known spot on? Yeah?
Yeah, okay, all right, so keep that in mind, David. All right, Tina, try and edit Tina a little, Tina, my husband and I have a self managed superfund Unlike the recommendation of one of your recent guests, we certainly didn't have a million in super fund. We set it up. Ah, quick question, No, how much do you think someone should have to set up a self managed superfund?
Well, they normally say at least three or four hundred thousand dollars. But the mind issue is why do you want to self managed fund? I've got one. They're great, they're great for business premises perfect, they're very good. If you've got I've got money in property syndicates that you'd need to self manage fund for that. That's the main thing.
I think the was that what often happens is that the market crashes, your superannuation goes down, no matter who it's with, Oh I'll do better meself, and they set up a self managed superannuation fund. Of course, more and more too. It's normally the bloke runs the fund and then he gets dementia and the wife doesn't want it. I think they're great in the right circumstances. As we're saying before, if you're taking out money fast, it's going to be much quicker in the self managed fund.
So no, what about investment property? I don't mean business proper because you mentioned the advantages of a business property. Of course, if you put your business in an SMS, if it's the great thing. But what about residential investment property inside self managed super funds? What do you think of that?
Well, as you know, I don't like residential real estate.
In the first place, Yes, so you're right, I likely to like it in the super fund.
Yes. But the whole thing is this, you make your property by gearing. I'd rather borrow one hundred percent of the purchase part of the property fully gear in my own name, which you don't get that concession in a superfund. It's a much lower rate of tax. Then if I've got to sell the property, sell it when I'm old and I don't earn any money, you know, I'll be in a much lower tax bracket. I'd rather keep your real estate out of your sleeper. It's much simpler.
And the point you're making is that you pay high tax as an individual, and the negative gearing is considerable because the tax is high. In the super fund, the tax, say, is lo so the negative gearing isn't as good. I suppose that's it all right, sure.
But also there's some conment out there the property spreakers. It will contact you and say we will start yourself many super fan exciousis saper and we will build you a property. And that's a recipe for disaster.
Believe me, I don't disagree with you for one moment. Sure, folks, you will never hear them on this show. They'll tell you that much. We will not have them on. And if I sniff anyone trying that, I will protect our listeners on that one. Okay, I think we will leave it at that for today, Noel, it's great to talk to you. The name of the of the latest book from Noel is why don't you tell us what it is? Again? Once more?
Will's Death and Texas made simple.
Well, well, we'll have you on again. It's been great to have you on today. So thank you very much.
It's a pleasure.
Thank you and thank you for listening. Everybody, keep those email is coming. I have some capacity you now to pick up some questions, so let's have them. The money puzzle at the Australian dot Com dot Au producer today was Leah sam Ogloo, who has done a great job both today and over the period when I was away, and I want to thank her for that on air. Okay, talk to you soon.