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