What’s the best way to save for my kid’s private school fees?

My wife and I are expecting our first child, and we are currently putting aside $2000 a month to pay for private high school fees that will commence in about 12 years’ time. The logic is that these savings are quarantined from our normal expenses, plus we won’t know our income 12 years from now. We believe it’s better to save now, rather than worry about how to afford the fees in the future ($40,000 a year in today’s dollars or $80,000 if we have a second child).

I am 55 and no longer work, but we own our house outright. We both earn around $100,000 per year with the majority of my income from shares, bonds and cash, while my wife works full-time. What would you suggest is the best way to invest the $2000 a month? The current balance is approximately $25,000. My wife is 31 with $15,000 in super. My balance is $600,000 with the maximum concessional payment of $27,500 made each year.

The best way to save is through superannuation because you can claim a tax deduction for the contributions. From July 1 you could increase your concessional contributions from $27,500 a year to $30,000 a year. If your wife contributed $2000 a month to superannuation as a concessional contribution, you would easily achieve your goal.

Given the difference in your ages, the best strategy would be for your wife to move the contributions to your account each year under the spouse contribution splitting arrangements. This would ensure the money is available in 12 years when you are 67.

I hear a lot of talk about leaving bequests to charity in your will. Is there any tax advantage in doing this?

Rachael Rofe from Australian Philanthropic Services says an estate cannot claim a tax deduction for bequests to charity, but it can benefit from capital gains tax (CGT) relief. In cases where the asset carries a gain, the estate won’t pay CGT if the beneficiary is a DGR charity. However, if obtaining a tax deduction is the goal, individuals have two options:

1. Gift the asset during their lifetime to receive the tax deduction personally. Keep in mind that if the asset you choose to give as a gift or sell to generate cash for gifting has appreciated in value you may be subject to CGT. However, you receive a tax deduction for the total gift, which will more than offset the capital gain incurred.
2. In your will, bequeath it to an individual, and they will inherit it at your cost base. If they choose to personally donate it to charity, they will be eligible for a tax deduction. Then it’s the first scenario again. They will enjoy a personal tax deduction for the total gift that will more than offset any CGT liability.

My wife and I have a large super fund invested mainly in shares, we are both 87. Would it be better to cash them in and put the cash in a term deposit?