Recent widow- How max pension.

Discussion in 'Financial Planning' started by devank, 11th May, 2020.

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  1. devank

    devank Well-Known Member

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    Hi,
    One of my aunts(Age 64) has lost her husband (age 74) recently. He has about $100K in his super.
    Their mortgage is very small.

    Currently, she is not on the pension. What are her options?
    Does she get the whole 100K as a lump sum?
    Should she go into some sort of income plan?
     
    Last edited: 11th May, 2020
  2. Angel

    Angel Well-Known Member Premium Member

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    Hello @devank, I am sorry for your loss. Your Aunt is fortunate to have a good man looking out for her.

    As far as I know, a beneficiary can take the Super as either a lump sum or as an Income account, but the details will be dependent on her circumstances, her husband's will and his specific Super account.

    She will need to know how her husband's Super is set up, and how it will affect any potential Centrelink payments. She will not be eligible for an age pension from Centrelink until she reaches the criteria age in a couple more years. Staff at their Super company can also assist with information.

    She can call Centrelink and talk to their Financial Information Service officers who will be very helpful regarding potential Centrelink payments until she reaches Pension Age.

    Once you both sort through the basic info, you may want to get further independent advice. The family home is not usually counted for Centrelink payments.
     
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  3. Terry_w

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

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    Will it push her over the assets test?
    The super must be paid out to a beneficiary - probably the spouse as a lump sum, unless perhaps the husband had a been on a super pension.
     
  4. Mark F

    Mark F Well-Known Member

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    The Australian social security system for retirement is weighted in favour of those who own their own accommodation. If there is still a mortgage on the house then I suspect paying it out may be the best option long term. It removes a constant drip of funds from her to the bank.
     
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  5. Stoffo

    Stoffo Well-Known Member

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    Estate planning is so very important
    Everyone's circumstances are differnt.
    I've told the other half to spend it all on a holiday :cool:
    As currently on my passing all my assets go into a trust, with the trust to provide for my partner until their time ;)
    All housing, cars and probably an allowance paid for :oops:
    With the balance to be distributed to children and grandchildren at their 25th b'day.
    Why I hear many people ask, because this world sux, and too many people are taken advantage of :mad:
    Am all for those around me to move on with their lives, but I don't want them to end up homeless after a short term live in leaves and takes HALF o_O

    My partner has the option to move and do whatever, so long as the trustee considers it isn't frivolous :oops:

    In your family's case, I would be redrawing to have any maintenance works done, and using the super payment to clear any outstanding mortgage (possibly paid dire tly from the fund?), with the balance going into the recipient's super (there should be benefits to this regarding qualifying for the pension later).
    Not advice, as I am yet to experience such issues
     
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  6. devank

    devank Well-Known Member

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    I thought it's best to keep a little bit of mortgage. Their mortgage is just 10K. Dipping isn't a big deal.
     
  7. devank

    devank Well-Known Member

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    That is what I'm trying to figure out before reaching out to the centre link.
     
  8. devank

    devank Well-Known Member

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    What if he was on a super pension?
    What's the asset test buffer? I know she has about 100K worth of Telstra shares and bit of her own Super.
     
  9. Angel

    Angel Well-Known Member Premium Member

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    Good morning
    All the info about income and assets limits for the various payments is on the Centrelink website, but it is complicated, ie look here, then look somewhere else, and then look somewhere else again. That is why i suggested phoning their Financial Information Services together. Your Aunt or her husband's executor will have to give permission for them to speak to you on her behalf, same with her husband's and her Superannuation companies. As a person under Pension age, her payment will be less than what the age pension is, but she would still be likely to receive some assistance, like the Health Care Card. My husband's sister is in a very similar situation so I have basic knowledge of how it works. Every person's individual situation is different, so it is not possible for your friends to guess on a public forum.

    If your Aunt's husband was already on a Super income account pension, that account normally goes to his beneficiary from the Super company. His Super fund and the solicitor who handled his Will would be able to give more information.

    All payments and services - Services Australia
     
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  10. Angel

    Angel Well-Known Member Premium Member

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    Did he have a current binding beneficiary nomination form? I keep ours stapled right inside the folder for Superannuation in our filing cabinet. We cannot know how your uncle's filing is arranged. That is where i would start to look. Sorry, I have to go to work soon.
     
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  11. Terry_w

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

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    The pension could revert to the spouse.

    Don't know what the 'asset test buffer' is but the 'assets test' is one test that is used to determine eligibility to social security benefits. Assets other than the family house over the threshold mean the full pension is not available. But it tapers off so that a part pension could be received even with a large amount of assets. the other test is the income test.
     
  12. devank

    devank Well-Known Member

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    Sounds like first, she needs to,
    1. Contact husbands super and find out what will be transferred to his wife.
    a. Lump-sum
    b. Pension Plan
    (Would this be taxed?)

    2. Find out the asset and income thresholds are with the centre link

    3. Workout her asset and income levels.
     
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  13. devank

    devank Well-Known Member

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    Thank you @Terry_w , @Angel & @Stoffo for your suggestions.
    1. Solicitors who handled his will is dealing with getting the super across.

    2. Thresholds to qualify full pension
    Asset threshold is about $250K.
    Income threshold is about $4,500

    3. She has about 300K in her own super. About 30K worth of shares.Husband's super is about 100K.

    My suggestion to her:
    1. Get a lump sum.
    2. Sell all your Super.
    3. Spend your money on items which can reduce her costs in the future.
    a. New car which is economical to maintain
    b. House renovations
    c. Solar panels (maybe rainwater tank for the garden)
    d. Construct a nice vege garden with all required equipment
    e. 'Gift' max of 10K to her children and ask them to park her money for an emergency. Go on a holiday

    Anything too wrong with the above list? Is there anything which can reduce her future costs?

    Her mortgage is under 10K. Her husband kept the 300K loan with 290K in the offset. Her husband kept that so that they have access to a 'loan' as they can't qualify for new loans.
    I'm thinking of keeping it going as it is but I don't know how the bank is going to behave now that there is a title change.
     
  14. Terry_w

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

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    What suggesting proper financial advice?

    Assets test for a home owner is $263,250 for the full pension but up to $578,250 for a part pension.

    How much is she over the assets test by and home much over the income test buy?
    Room for a granny flat? Extensions?

    What do you mean by 'sell all your super'?
     
  15. devank

    devank Well-Known Member

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    That should have been 'Shares', not super.

    I got her to chat with her own super people. She might choose proper financial advice there.

    $300K Super + 30K shares + 100K incoming lump sum = $430K.
    That's about 170K over.

    My suggestion would be
    Car = $70K
    Carport = $20K
    House Renovation = $30K
    Backyard = 10K
    Gift = 10K
    Holiday = $15K
    Solar panel = $15K

    That's already 170K :)

    According to her Super's calculations, she will be getting about $46K per year from her super and pension after her retirement age.
    Her kids also give her about $2000 per month. So, that is $70K to spend, which is more than enough for her.
     
  16. Terry_w

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

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    how much would she get without doing any of the above?
     
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  17. devank

    devank Well-Known Member

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    Good question. My 46K per annum was based on the $300K super balance.

    I took the assumption that her super should last till the age of 85.

    For all her funds into her super = 300+100+30= 430K, she will be getting $48K per year.
    upload_2020-5-24_18-58-31.png

    If she leaves only 260K, she will be getting $41K per year.

    upload_2020-5-24_18-58-59.png
     
  18. Terry_w

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

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    So getting 'rid' of $170k will result in her annual income changing from $41k per year to $47k per year?
     
  19. devank

    devank Well-Known Member

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    Otherway around.
    Spending 170K now would reduce her income from $48K to $41K. $7K reduction in income.
    To me, it worth spending money. There is a possibility she may not live even that long either.
     
  20. Terry_w

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

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    That doesn't make sense to me - unless she will enjoy the spending, more than the reduction in income.