Need help for retiree nest egg

No. See Granny flat right or interest - Department of Human Services

 

This is scaremongering. A formal family agreement properly written up by a lawyer is legally binding and protects against such an event.

 

actually it wouldn't if set up right.

 

Not its not scaremongering but a serious issue which is happening now.

Imagine you gift your property to your daughter and she later:
gets divorced
goes bankrupt
mortgages the property
kicks the parents out
etc

Legal disputes of this nature happen in the supreme courts and can be extremely costly.

 

After selling the house, these in-laws would have $1M in assets which, even as non-home owners, would significantly reduce their aged pension entitlement. See: Assets - Department of Human Services

 

Another option for the parents in law may be a reverse mortgage.

 

Still sounds like scaremongering to me. If you have potentially dodgy kids like this, don't include them in the arrangement. If they become dodgy after the fact, take them down in court like they deserve.

 

These work, but at the high eventual cost of giving a lot more of the associated asset's value to the bank rather than themselves.

 

Which is why they are where they are.

How do you retire THEN decide you don't want to live on the pension? What were/are they thinking they would live on?

 

No one marries with the intention of divorcing. No one plans to go bankrupt. No one plans to die or to become incapacitated.

I have actually given legal advice to a woman who wanted to sell up and then construct a granny flat on her daughter's property. I had to point out all the potential risks that could happen and then left it up to her to decided whether to go ahead or not.

taking people to court would cost $50k upwards probably so best avoided - even if you think you can win.

 

Granting a life estate may be an option as well. Build a gf, sell the property with a life estate on the gf. This will only appeal to an investor (less so if there's no return on the gf). The inlaws must be prepared to live in the property until they're incapable to do so ie nursing home bound but have some flexibility to lease out the gf when this happens.

 

Air? Charity?.....etc. all but taking the time to invest....

 

I am just presenting the OP with a strategy that would actually work quite well financially for all parties given their in-laws' asset rich / income poor financial situation. Yes there are risks with this, as with any major financial arrangement, but these can be reasonably mitigated by judicious selection of parties to the agreement and a well worded arrangement document that covers worst case legal issues. I'll leave it at that.

 

I am not disagreeing with you that it can work. Just needs careful legal and financial advice and planning.

 

Each family group has its own dynamic. When the arrangement or planning occurs, there were probably noone has malice intention to do wronged. But when things go sour. Then all break loose. Son in law or daughter in law's legal system will be looking the other party's asset and demand half of it. etc. What will happen to the elderly? possible victim of domestic dispute.

 

The elderly in his or her 80-90's, fragile, a possible victim, would then look for help. Never dealt with lawyer before. Drag into this mess. anxiety for elderly can bring them to their wits' end

 

Thanks for this!
Seems like this option would work quite well with the correct measures in place

 

Thanks for everyone's contribution!
Really appreciate your insights.

 

I would rather have the money for lifestyle for the next 20 years than worry about reducing pension entitlement. As the funds diminish pension and rent support kicks in. .. so balances out early pension reduction. ( If you don't own a property you are allowed more assets before the reduction kicks in)

There is a very useful calculator at Retirement Projector
That shows how the pension kicks in as the assets diminish.

 

Although this could work, it has some serious limitations as follows:
1. The cumulative pension loss becomes significant, starting out at a $22K reduction in the first year alone and massing into the hundreds of thousands of dollars, depending on how fast they draw down.
2. Earnings on the fund diminish as as the funds draw down, accelerating the decline in funds value in later years.
3. The combined effect of points 1 and 2 means a very poor return of investment capital, namely less than 50c in the dollar again dependent on how fast they draw down.
4. Rent assistance is a pittance, even at the current full rate of $60.90 per week and particularly since the OP's in-laws would likely want to live in an accommodation standard and location similar to their current situation. At say 4% gross yield on their current place, that puts weekly rent at nearly $700 per week.
5. The biggest kicker is what happens when the asset base runs out in 20 odd years time, namely that their combined OAP + rent assistance of $37K pa or $715 per week at current rates only just covers their rent, never mind actually living. Sure they may be dead by then, but what if at least one of them is not?