My father losing his pension.

Discussion in 'Superannuation, SMSF & Personal Insurance' started by SimonSays, 19th Apr, 2022.

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  1. SimonSays

    SimonSays Member

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    Hello brains trust.

    My father owns his property out right valued at roughly around 1.2 million. I currently live in a granny flat in the rear of the property with about 50k owing in repayments.

    We basically have a plan to do a knock-down rebuild of his front property and are going for a dual loan for myself, my partner and him.

    We are also going to get put on the existing property title and go 3 ways before getting the loan.

    My big question is, will my father completely lose his pension because of this situation? Is there any way around this issue? Seeing its not completely being gifted will it apply the same going 3 ways as if it were given 100%.

    Also can anyone shed light on a "carers contract" I've read that if your parents gift you their prime residents property and you make a contract stating you are moving in with them and also taking care of them for the rest of their lives services australia will bypass taking their pension.

    If anyone can help me it would be greatly appreciated.

    Thanks in advance.

    Kind regards
    Simon.
     
  2. Trainee

    Trainee Well-Known Member

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    How do you have repayments on a loan on the granny flat when you are not on the title?

    where will your father live after the rebuild?
     
  3. SimonSays

    SimonSays Member

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    Trainee - the granny flat loan is under his name I am paying the loan fees.
     
  4. Scott No Mates

    Scott No Mates Well-Known Member

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    In a nutshell, your question is will he lose % of the pension if he divests ⅔ ownership for $0 payment. It would need careful structuring to achieve the desired outcome.
     
  5. Tofubiscuit

    Tofubiscuit Well-Known Member

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    wouldn't the property still be your father's main PPOR? which case its excluded from pension calculations?
     
  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    It is a disposal so depending on the value of the part he is disposing he could lose the full pension. The value of the disposal is an asset for him, even if the main residence and there will be deemed income from this.
    the way around this is for him not to dispose of the property.
     
  7. Gen-Y

    Gen-Y Well-Known Member

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    Your dad have a good intention to help his son.
    This is a total messy!
    I don't think you have thought it through and through how you will affect your father's pension and quality of life from receiving full / part pension.
     
  8. SimonSays

    SimonSays Member

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    Thanks heaps for the replies.

    So even being his prime residence and still having a decent percentage of ownership voids pension?

    Also does anyone know more about the care taker option as I read it stated if there is a care taking contract made they will keep paying his pension.
     
  9. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    No. It would be the fact that it is a gift which could mean it affects the pension.
     
  10. Marg4000

    Marg4000 Well-Known Member

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    Your fathers is essentially gifting two-thirds the value of the property. (You say the title will be split between dad, you and your partner.)

    This amount will be treated as a deprived asset for five years.

    How this affects dad’s pension depends on his other assets, but may wipe it out completely.

    Your father needs good, independent legal advice, particularly if you have siblings. And sorry to be a bit harsh, but a future breakdown in your relationship with your partner may mean dad loses his home in a property settlement necessitating the sale of the house.

    (And yes, I have seen a similar arrangement end very badly for the parents in a shared property with a daughter and her husband who were subsequently bankrupted.)
     
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  11. datto

    datto Well-Known Member

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    I think you need to speak to an advisor who is an expert on Centrelink matters. This will cost $$$ but may save you $$$ as well.
     
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  12. SimonSays

    SimonSays Member

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    I actually found the information I wanted to share on the subject.

    How to give property to your kids and keep the age pension

    "The parent or parents are no longer the owners; they've transferred the home into their child's name.

    In return, the adult child agrees to look after their parent into old age and provide them with a home. The next generation takes on the responsibility for bills and home maintenance, while grandma or grandpa may look after the grandkids as part of the bargain.

    Centrelink is OK with this arrangement, says information officer Justin Bott. It means the former home owner would still qualify for the pension and public aged care if it is needed later on (they have no assets, after all)."
     
  13. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    This involves the pensioner paying for a life interest or a right to reside in a property owned by someone else, usually a family member. The payment isn't considered a disposal if it falls within a specified amount.

    It could work if the parent sells to you and then you grant a life interest in exchange for some money.
    But there are a lot of legal issues to consider and it would be costly to do.
     
  14. Gen-Y

    Gen-Y Well-Known Member

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    slippery slops - fun fun.

    Can you go alone without involving your dad?
    This might be the easiest way forward and less headache.
     
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  15. Marg4000

    Marg4000 Well-Known Member

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    So what is the benefit to dad in the arrangement?

    I certainly understand how it benefits you and your partner, but to me dad is putting his whole financial future into your hands. Sadly family breakdowns do occur, and once your father has given away his home (or the controlling interests if he only retains one-third) he cannot simply take it back.

    From time to time there are sad media reports of elderley parents trying to reclaim loans or assets from their adult children.

    And yes, I am probably of your dad’s generation, and have seen these arrangements, although certainly entered to with the best of intentions, go horribly wrong. And it is usually the parent who has the most to lose and suffers most.
     
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  16. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    eg Other siblings get wind of this. Dad passes away and the game breaks. Worst can be Dad ends up needding age care before its all completed and there is no power of attorney and other issues in place and the game ends. Financing for these issues can be incredibly complex and high risk.

    Our financial advisory business offer aged care services but we will often refer these issues to solicitors as elder abuse can be evident when they have zero idea about what is occuring. If the parent cant explain the complete picture without the kids present its a worry. Rarely we see the parent benefit to help pay for aged care etc. Commonly the parent has land that the kids seek to develop

    Adding kids to Dads title will have some implications for duty and tax. Its NOT always CGT free !
     
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