Transitioning to retirement

Not saying that this isn't the case with other well intentioned families however this is a family that is very tight nit and small. Each generation has cared to end for the previous generation.

 

They cannot live on equity, this is the main issue. If the rent was $500 p.w. net happy days, but its not which = forced sale.

However if they went down the path of the PPOR $1M house there would be no issue and they would receive a full pension. It's an all or nothing system unfortunately and this person would never do something so extravagant (which is understandable given their background)

 

Ahhhh I see. From your earlier post I thought the PPOR was near to family, hence the reason for staying there. Have they considered a knock down of the holiday house and build a duplex for their future care personnel to live in one half of? Or is it the house itself that holds the sentiment? This would be easier to fund if the PPOR was able to be sold. But seeing as it has already been gifted this is out.

 

CGT will be involved in this case

 

Sorry it's difficult to explain the full circumstances here.

That was the thinking behing the GF but again the issue becomes: does the potential $250 p.w. rent received knock out the pension altogether?

Because the house is so small they could possibly move it to the back of the block as the GF and build at the front. They wouldn't knock it down.

Edit: the holiday house is still the original one purchased in the 60's

 

The old PPOR was a pre CGT asset. Obviously not now though. I know it doesn't make much sense to have transferred the PPOR on face value but again there was an asset protection element.

 

I disagree at 70 $1m would see them through to the end at a very good standard for a retiree considering thy also had a debt free PPOR.

$1m+ house with no debt and only the pension would be tough when you factor in maintenance, water and council rates and insurance.

 

$1m annuity should pay around $6k pcm for 25 years.

 

Bit late now, but could they have perhaps used a testamentary trust to pass on the old PPOR? Don't know if they can be challenged similar to wills...

I have to say though, the statement that "this is a family that is very tight nit and small" doesn't seem to fit with the statement that "there was an asset protection element to the transfer of PPOR to do with legal challenges to inheritance".

Your comment in the other thread suggests that the recipient of the PPOR was you, so while you (or whoever that was) and this person might be tight-knit, it seems the person isn't quite so confident about other family members. You might want to ensure that the person also has a power of attorney and power of enduring guardian done, so that the trusted family member gets to control their affairs if they can't.

 

It would be $1M cash, no PPOR in those circumstances. $1M house would have been approx $450k build + land value. In any event the point is being lost. The current system encourages them to splash out on a big expensive house and then supports them with the aged pension. However penalises the same value of asset spread across 2 properties.

 

There is a relative by marriage issue here.

When a relative on their side passed away they left the surviving spouse alone for a week (the person was in their 90's and required constant care) and sold the asset from underneath the surviving spouse at the earliest opportunity.

There was similar issues when the spouse of our relative was terminally ill. The hunt for assets by the other relatives was on.

Enduring power or attorney is a good idea. Chrissy and I have them for this very reason.

 

Transfers without consideration can be attacked. Especially where there is a connection to nsw and death occurs within 3 years of the transfer.

There are also other tax issues and asset protection as well.

A better way may have been a tranfer at full market value and then a gift of cash. If social security wasnt an issue the cash could have been loaned or gifted to a related discretionary trust perhaps one which the giftor didnt have any part in.

 

Testamentary trusts can be attacked in a few ways. They are just a will trust so if the will is invalid so is the trust. Family provision claims too

 

Pretty sure you are allowed $200k asset outside the family home before they start penalising. So could have gifted you half the Holliday house and kept living in the PPoR.

 

It still leaves the PPOR open to claim. Terry has alluded to a 3 year limit to challenge the transfer so once that period has expired the asset is protected.

Also the distance from family of 1.5 hours is a factor. They would live in the holiday home rather than remain in the PPOR.

 

Would this be a correct - if they go down the GF path at the holiday home and wind up with a net rent of of $200 or less from both rents (due to borrowing for flat, expenses etc) no pension is available because they still fail the assets test?

 

What is the holiday house worth?

Ultimately it's all well and good wanting to keep it for the next generation but why should taxpayers pay for this indulgence? They should have kept their PPOR, sold the holiday home, pumped their money into super and invested the proceeds. At their age all the income earned would be tax free in super, i find it odd that they went to effort of obtaining advice etc and instead of the simplest option that made the most sense financially, legally abd morally they chose to transfer their PPOR to someone else just so they could get the pension and now are in this mess.

I'm not saying they are bad people at all, just that the entire approach was wrong which is why the actions taken ended up wrong too

 

Granny flat right or interest - Australian Government Department of Human Services

 

For the pension you have to consider the
Income test
Assets test
And deeming rules for gifted assets.

 

I understand your point however on the same token, why should the tax payer pay for the indulgence of selling the PPOR and the funds put into a new build? Same result different approach.

At the end of the day they didn't want a forced sale and that's why this path was chosen.

If they can now pump money into super, build a GF and work that extra 2 - 4 years to be self sufficient, they will.

Edit: Sorry didn't answer your first question - $550k+ at a guess. The house is fairly worthless, you would call it a 1 bed plus study.