Transitioning to retirement

Could they not label the GF as "Carers quarters" and not charge rent?

 

I dont quite get your point about the taxpayer paying for their new build. If they had sold the ppor those funds would have been used to build the new place, how is that using taxpayer funds?

Basically they had over $1m in unencumbered assets and it sounds like they are happy to live fairly modestly, the 550k from the holiday home earning even 6% would have seen them living in a paid off home, earning over 30k tax free a year that, if invested conservatively but wisely would increase over time or at the very least track inflation. They would have been set and would still have had a paid off home to pass down to their kids after they passed on.

Now, they have a run down holiday home; no more PPOR, potential complication of future living arrangement (I understand your family is very close but it is still not as certain as being in their own paid off home) and, possibly can't pump the cash into super, im not an expert on how long people can pump cash into super after 65 if they pass the work test

On top of that we have a situation where the australian tax payer is potentially paying 30k or whatever for the next 15/20 years, so over 500k potentially.

No one has benefited from this approach apart from the family members who will inherit/have inherited and it doesn't sound like they're putting their hands in their pockets to help your uncle and aunt atm

 

Sorry if it sounds harsh, not passing judgement just hope anyone else reading this thread takes some thing away from it and avoids making the same mistake.

Pension is meant to be for those who need it but too many view it as an entitlement that must be protected at all costs instead of a worst case scenario

 

They don't require care at the moment and there would still be a loan involved for the GF which needs to be repaid.

I really appreciate the feedback everyone, I know it's a frustrating, avoidable situation which we spent years trying to get them to plan for, it's only now the penny has dropped.

 

Okay so here are the problems. The land is valuable on the holiday house, the house is not. The return will be around 3.5%. If the return was 6% there would be no problem.

The point I make on the build is this:

Scenario A: Sell PPOR and build on holiday land = $1 mil value. Not included in assets test as it is PPOR. Eligible for pension.

Scebario B: Keep PPOR and holiday house in family = $1 mil value. Included in assets test, not eligible for pension.

The family member is still working full time so no financial support required currently. If that changes they will be financially supported and housed for the rest of their life, including a scenario where they have zero income due to the assets test.

 

No I completely understand why people would get annoyed.

It's simply a case of life long attachment to both properties but because they are in lower socio economic areas there is insufficient return from them to live on.

 

Regarding her actual need for income:
How much money does she need to support herself in retirement? The comment has been made that the family that received the family home as a gift will support her for the rest of her life. She's given up her home, worsened her financial position and is so far receiving nothing but warm fuzzy feelings in return.

She doesn't sound like she has extravagant taste - not a lot of people with entitlement issues work well into their 70s. If that's the case she may not not a whole lot of upkeep and the family that received the house should support her and pay her bills, with the rent from the holiday home subsiding her living costs.

When it comes to maximising age pension entitlements, you're pretty much smoked for the next 4 years while the home proceeds are deemed for the income test and considered for the assets test. Once that expires she will be left with a holiday home as an asset with deemed income, actual income doesn't matter, and her super and savings earning deemed income.

One option may be to reverse the gift by repaying it, then sell the house to the family member for a reasonable price. She would actually then have the funds to support herself, pay the family a reasonable rent for having her live there, the family members still get the benefit of the asset but they'll have to pay for it.

Regardless, with the holiday home plus her savings she will likely be near the upper end of the assets test after 1 Jan 2017 changes, if not exceeding them by the time she is fully retired.

All this talk of granny flats and renting and relocating houses...The questions should be where does she want to live and how much does she need to pay her expenses in retirement. Until those are answered this is all unnecessarily complicated.

 

Have to agree about all the complicarion - busy addiction. Whose?
She's so strong to have made it this far in the workforce but she must be looking forward to slowing down, surely.
Does she want to be building and then living in a granny flat at this stage - probably doesn't want to live with someone else's family either.

 

Actual income needed will be around $400 p.w. so in reality the need for extra income will only come about in their 80's.

Repaying the gift is also an option and may actually be the way to go, it would solve all the issues in one swoop and leave no uncertainty.

They want to live close to family, the old PPOR is the furtherest distance from family so the holiday home could be the best option for new PPOR while they are self sufficient.

 

They don't want to retire. The charity they work for has become very corporate and started downsizing. It's a nervous wait for June 30 every year to see if there will be a job come July 1.

Doesn't want to build, doesn't want to rely on other people but wants to be close to family. It's an uphill battle with no easy solutions. Repaying of the gift may be the way to go.

 

Just be aware that the only benefit of reversing the gifting issue is centrelink benefits and her having savings that she won't be able to contribute to superannuation, so would need to invest in her own name. Might not be worth the cost, just put it out there as a consideration.

If the lady in question has her income needs met from her existing savings and family support then she may be better off just leaving things as they are and forgetting trying to maximise any age pension entitlements. That would be easiest, maybe not financially optimal but it would meet her needs.

 

I thought another option could be to salary sacrifice into super and draw a pension from it to gain maximum tax benefit. I know you can do this as part of a transition to retirement plan around 55.

Their primary concern was keeping the homes in the family hence reversing of the gift/payment for the gift may provide that simple solution.

 

Except for those potential related-by-marriage money grubbers...

 

If payment is made it becomes a non issue as the asset is still removed from the will.

 

Oh, so you just mean the recipient paying for the house. I thought you meant giving the person the house back.

 

Not always. I think have written a legal tip on this.

 

Do recall the title? I'll take a look.

 

I'd be concerned about what happens if the carer's life ends first (eg car accident). Given the path that has now been trodden, it is absolutely critical that the elderly family member being cared for is catered for adequately in the will of the carer.

 

> The suggestion they are attempting to defraud welfare is offensive

They shifted assets for the purposes of qualifying for a pension they are 100% defrauding welfare. They've effectively got 2 properties (PPOR + holiday home) & $200k in cash/liquid assets (super + cash + pensioner bonus scheme)

Hardly "battlers".

 

Income and asset tests are there to be used / manipulated within legal limits. eg prepaid funerals can legitimately reduce assets and avoid gifting concerns.