Diane would like to take out a reverse mortgage to help her children financially but is concerned that her Age Pension will be affected, despite being told it won’t be.
Q. Diane
I am thinking of getting a reverse mortgage on my home, mainly to help my children and maybe get a new car. I have two grandchildren who require dental work and a daughter who needs surgery. I did ring Centrelink to see if it would affect my Age Pension and was told it wouldn’t if most of it was going to my children. I am still worried, though. What do you think?
A. Before you consider a reverse mortgage product, you should consult an independent financial advisor.
As we were not party to the conversation you had with Centrelink, we can’t comment on whether the advice you were given is correct. However, as a general rule, any lump sum you receive from a reverse mortgage is considered an exempt asset for up to 90 days.
Although exempt as an asset for up to 90 days, the lump sum will be considered a financial asset and deemed to earn income until it is spent.
If you purchase a car, this car will be assessed as an asset from the day you take ownership.
In regards to gifting, you can gift $10,000 per financial year up to $30,000 over five consecutive years, with any excess amounts being assessed for the full five-year period.
You should confirm the above with a Centrelink Financial Information Services Officer (FISO) and specifically ask if the money you give to your children will be classed as gifting.
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