How to pass on your assets without losing your pension

The move that allows you to pass property to your kids without upsetting Centrelink.

How to pass your assets on to your kids

Many parents these days are keen to help their kids enter the property market, but Centrelink has very strict rules regarding gifting assets to the next generation.

There are, however, ways to get around them.

You are currently allowed to gift just $10,000 a year – or $30,000 over five financial years – without affecting your pension payments.

If you gift more than that Centrelink starts to look at reducing your government entitlements.

There is, however, a loophole when it comes to property, which can allow you to transfer your property to the next generation, without negatively affecting your Age Pension, although it does require a change to your living arrangements.

If you stay in the property to live on the land you are transferring (whether in a granny flat out the back, or a room in the house), Centrelink does not consider the transaction a gift.

Instead, it considers the transaction an exchange, where you receive the right to live there for the rest of your life without having to board or pay the bills, and where your offspring have taken the title of the property.

While this arrangement may not seem attractive now, if the Government ever changes the assets test to include the family home, this will quickly become quite a popular arrangement.

The obvious drawback to the shared living requirement is when you have more than one living child who you would like to receive your assets.

In this situation, you could keep a portion of the property to bequeath to your other children, but that also could create problems when you die as it can force your co-dwelling child to sell their family home at what will already be a fairly stressful time. If you consider this option, it is important to include all of your children in the discussion and consult with an estate lawyer.

Another headache when transferring your property involves aged care. If your co-dwelling child can no longer cater for your needs and you need to move to aged care, you will have little say as to where you end up.

When you have no assets to meet the aged care accommodation payment, you could end up last on the list for location preferences.

Would you ever consider a granny flat arrangement to pass your assets on to the next generation?

YourLifeChoices has created a ‘one-stop-shop’ online tool, RetirePlanner to help pre-retirees and current retirees plan or check their Age Pension entitlements. The tool costs $19.95, which is fully refundable if you are not totally satisfied.

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    COMMENTS

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    Old Geezer
    28th Feb 2018
    10:50am
    Just transfer your excess assets 5 years before you become eligible for the OAP instead.
    Cowboy Jim
    28th Feb 2018
    11:11am
    That is the way most people I know have done it; another way to
    enjoy the fruits of your labours is to spend the money before you
    get to 65 years of age. People may realise they can live on super from 55 years on and spend the stuff for the next 10 years without
    Centrelink breathing down their neck. People will always find a way
    when they realise they're being done over.
    TREBOR
    28th Feb 2018
    11:19am
    That's the trouble with our present system - it encourages grift and not thrift..... stupid really for a system to differentiate between when you gift to your kids.

    A no assets test pension will cure that....
    Anonymous
    28th Feb 2018
    11:37am
    So Trebor, you are advocating that multi millionaires should get a pension? How ridiculous! Why not give them the dole too, before they reach age pension age? What is your argument against that, and how therefore can your position be consistent? The current scheme is flawed, I am sure we all agree on that. But I don't see how handing those that don't need it, a pension, is a smart or sensible way of correcting the present unwieldy situation.
    Old Geezer
    28th Feb 2018
    12:10pm
    It is what you have when you reach OAP age that counts so if you divest yourself of enough assets to get the full OAP and benefits then you are well within the rules. I know of many people who have done that and are now living very well on the OAP.
    TREBOR
    28th Feb 2018
    12:59pm
    You missed it, BA - they get a pensions but they pay tax on all other income strands and fringe benefits etc including free gift from their own companies...

    Think it through... how many politician retirement perks will be paying tax? (snuckles under armpit)...
    TREBOR
    28th Feb 2018
    1:00pm
    They don't get unemployment benefits because they have an income and a job.

    Nothing to do with re-arranging pensions and recouping tax on income.
    Rae
    28th Feb 2018
    3:08pm
    Friends who could just built new retirement houses and spent down including gifting before the 5 year period to receive a worry free OAP and concessions. Makes a great deal of sense.
    Old Geezer
    28th Feb 2018
    3:50pm
    Many people are now retiring early, spending down their assets, buying a more expensive house and gifting their assets so they get a worry free pension plus benefits.
    TREBOR
    28th Feb 2018
    11:17am
    Ah -good thinking, 99 - but don't be too sure The Good Colonel won't chop that one off.

    Never let the bastards know you're coming...

    28th Feb 2018
    3:40pm
    Max OAP plus super income can get is around $54k for a couple and $32k for single

    Comfy if you dont plan on extravagant holidays every year and replacing your BMW every 3.4 years

    Otherwise hang on to your assets and keep giving $5k every year by bank transfer and a few grand here and there as petty cash
    Sundays
    28th Feb 2018
    4:22pm
    I would be very wary of Granny flat arrangements. Friend did this and now her daughter and son in law have broken up and my friend is left with very little. It would be political suicide for any government to include the family home in the Asset test. Right wing think tanks might suggest it, but I doubt it will happen
    GeorgeM
    1st Mar 2018
    8:22pm
    Just a really dumb idea to get rid of your home asset and financial power with it for the rest of your life!
    Sundays, your comments are also very true.
    McDaddy
    2nd Mar 2018
    8:58am
    I agree with George, you are better off with monetary assets and a part pension than giving it all away or spending it and being miserable for the rest of your life.