My mother would like to go to a retirement unit but wants to maintain her pension . Her current situation is she has assetts cash/shares about $140,000 and owns a home valued at $350000 . She receives a part pension of $200 per fortnight. She wishes to leave the home and buy into the retirement unit which is approximately $160000 but does not want to lose her pension in case she will need to go into a nursing home in future. Does anyone have any creative solutions to her situation.
Hi Wrogers,
Firstly, your mother’s home, which is obviously her PPOR is not subject to asset testing, as it is where she lives. It is a different matter, however, as far as the 140,000 in shares/cash. You will need to check with Centrelink, however, I believe the asset limit is 125,000 for those seeking unemployment, but for aged pensioners it may be a bit higher….give them a call.
If it is the same (say 125K) perhaps she could spend 15,000 as the deposit for her retirement unit, and still be within the asset limit. Thus no risk loosing her pension.If she uses all the equity in her home to buy the unit, she will have money left over, some of which she can distribute elsewhere, but these options need careful consideration, and I suggest that she/you seek professional financial advice which addresses her financial situation in later years (with minimal risks).
All the best,
Jo
Firstly, your mother’s home, which is obviously her PPOR is not subject to asset testing, as it is where she lives.The problem is after she leaves the place to move into whatever unit she ends up in it is no longer her PPOR is it? She will end up with no pension with a property of that value as an IP from what has been discussed on here previously. A search might reveal those threads on those situations and possible resolutions.
Of course she might be able to get a decent rental income from the property as well as further income from dividends/interest in the other investments.
Hi Sizzling_duck,
That’s right, which is why she will need to SELL her current PPOR, otherwise, you’re right, it will be an IP; making it income (rent) and asset tested by Centrelink.
I suggested she use the equity (i.e. sell it) and buy her retirement unit, and distribute remaining funds elsewhere, in planning for her later years.
Cheers,
Jo
You will need to check with Centrelink, however, I believe the asset limit is 125,000 for those seeking unemployment, but for aged pensioners it may be a bit higher….give them a call.Definitely check with them, as I vaguely remember one of their so called “financial advisors” (yeah right – but that’s another story) mentioning to me, a figure closer to $360,000.
Allan.
The assumption here is that she needs to buy the retirement unit. There is no reason she has to buy it and should be far cheaper than the rental income she could generate from the IP.
Of course she loses the $200 per 14 days if she keeps the house or holds the full sale value of the house herself (which with a conservative interest rate and would earn about $17000 a year) and don’t forget the shares/other investments income.
But I believe there was better advice given in those other threads most probably from the beginning of last month on a similar topic.
Originally posted by wrogers17206:My mother would like to go to a retirement unit but wants to maintain her pension . Her current situation is she has assetts cash/shares about $140,000 and owns a home valued at $350000 . She receives a part pension of $200 per fortnight. She wishes to leave the home and buy into the retirement unit which is approximately $160000 but does not want to lose her pension in case she will need to go into a nursing home in future. Does anyone have any creative solutions to her situation.
If your mother moves to a retirement village, her assets will automatically become 350k + 140k = 490k and lose the pension since the upper limit for the asset test is $306,250
However if she plans to purchase a unit in the village, she has one year until her home becomes an assessable asset. If she spends 160k on the unit her assets will fall to 490k – 160k= 330k, still too high for a pension.
Some alternatives would be to spend a higher amount in the unit, but correct me if I am wrong in believing such units are a very poor investment, overpriced, hard to sell and with fees that would make the commonwealth bank proud (?)
Her predicament is a common one, not too rich not too poor. Does she need to buy the unit? Can’t she just rent it?
She could invest conservativley the 490k in ING at 5.4% for example, that will give her an income of ~27k per year, more than any pension even taking away the rent.As for the time of the nursing home, I would enquire first, as some nursing home are real sharks when it comes to people with some money in the bank. It may be possible to secure the cash in a trust in stead that in her name so that she is a beneficiary and the nursing home cannot get their dirty hands on your mother’s money.
Please check with your Financial Information Service at Centrelink, and with and independent financial adviser (if such thing exists)
May God prosper you always.[biggrin]
MarcThanks for the ideas so far. My mum has a place picked out and she has friends there.She is not actually buying the unit but I think you call it leasing.Eventually when she moves on an amount say 70% is returned to her estate. Could her home still be considered her PPOR if she lets other family members use it. In this way the family could help fund her into the unit and she keeps her pension. Or alternatively it would be a lot simpler to do as monopoly suggests sell PPOR ,”buy” unit and do something with remaining funds Is there anything that she can do, other than spend it, that allows her to maintain pension. She is old and frightened of change. Sorry can’t find old threads If you can please point me in the right direction.
Not Knowing what age your mum is or her health. or in where you live as in distance to your mum.
or if she is lonely and wants to have a friend close by., what happens if she sells the house and lives in the village and her friend dies and she is then living alone so to speak with out her friend. or she decides she doesn’t like the place and wants to go home. …and she only gets 70% back from her money?….Is there any way you could buy the house at the amount of money she needs to keep her pension[because I know its scary to lose your pension and your independace at any age] you could have a solicitor draft a letter saying the property is to be kept in care for your mother until such time as or if she requires it back…live in the house or rent it out. thus saving the house and the pension payment.and having a nice investment property which will increase in value not lose 30%.
just my thinking. I guess at this moment all suggestions are worth looking at.[buz2]Another possibility I did not explore because there is not enough information in you post, is that your mum purchases the right to live with you in your home or in another you purchase together and put in your name, that is more adequate, with granny flat, duplex, separate unit whatever.
By doing so, your mum will pay for the right to live in the new accommodation, yet no property is registered in her name only a contract with you. This is called the granny flat rule, is perfectly legal and means a person can spend a reasonable amount of money to buy her right to live in someone else’s property and this money is no longer assessed as an asset, will not be considered gifting and also not deprivation of assets.
There is a limit to how much your mum can pay for the accommodation she gets into, but it is a very generous limit and depends on the value of the property among other things.
I had recently a case where ‘mum’ lived in an old house on a large block of land. She transferred the property to the son’s name who developed the land with 4 townhouses, and gave mum the right to live in one, fully furnished, for life. Mum still has her full pension, lives in a new house with new furniture and pays no services, nor rates. Neat. Before you jump to the phone to ring your mum, work out the figures, there are limitations, and remember that no property must return to mums name or it will be an ordinary transaction.
May God prosper you always.[biggrin]
MarcHi wrogers
If you click on the search button under Forum Boards on the left hand side, and do a search for ‘pension’ or ‘Centrelink’ or ‘fiso’ you should come up with a few threads that have been discussed regarding these issues.
Hopefully something in there will help you out.
I really hate the thought of only getting 70% of that $160K back – cos if memory serves, some of the ‘contracts’ don’t even allow for any CG, so if your Mum is there 10 years, and the ‘retail’ value is now $300K for them to ‘onsell’, then she would still only get 70% of the $160K back.
that’s what’s the go with the mother of my ex, and it really sux – especially as all the services they promised when she signed up (9 years ago) have not materialised
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