If Mum lives with us does she keep her Pension as a Granny flat Pensioner

If Mum lives with us does she keep her Pension as a Granny flat Pensioner ?

by Christine Hopper

Sue asks, “If Mum lives with us does she keep her Pension, can she continue as a Granny flat Pensioner ?” Many years ago Sue promised Dad that they would never put Mum into an “old peoples’ home” but now Mum is too frail to live alone. So Sue wants Mum to come and live with Sue’s family. Sue and her family would be offering a ‘granny flat’ arrangement by inviting Sue’s Mum to come and live with them.

If Mum lives with us as a Granny flat Pensioner, does she keep her Pension while her home is vacant?

A homeowner Age Pensioner could leave her home vacant for twelve months without impacting her Pension payment rate provided that she remained in Australia. The twelve month period might start with a hospital stay, then some rehabilitation and then a move to her daughter’s home. The date of admission to hospital could be recorded as her date of exiting her home: the start of her twelve month absence.

One year after the homeowner Age Pensioner exited her home to live in another home in the community, the Pensioner becomes a ‘non-homeowner’ for Pension Asset Test purposes and her vacated home is counted as an ‘investment property’.

Thus one answer to “If Mum lives with us as a Granny flat Pensioner, does she keep her Pension?” could be “Yes, for the first year that her own home is vacant.”

If Mum lives with us as a Granny flat Pensioner, does she keep her Pension while she collects rent from her own house?

If Mum lives with Sue and rents out her own home, any rental income would count as Income for Age Pension means testing purposes. In March 2016, a Single Age Pensioner could have $162 per fortnight of Income before the Income Test starts to bite. Few homes would generate only $80 per week of rent after deducting the costs of ownership of the property and agents fees.

Thus in answer to Sue’s question, “If Mum lives with us as a Granny flat Pensioner, while she collects rent from her own house?”, is likely to be “Mum’s Age Pension would be reduced by the Income Test during the first year that she is out of her home.”

The Income Test reduces the Single Age Pension by fifty cents per fortnight for each additional dollar per fortnight of Income in excess of the Income Test Allowance of $162 per fortnight for a Single Pensioner.

If Mum lives with us as a Granny flat Pensioner, does she keep her Pension after the first year?

After a homeowner Age Pensioner has been away from her home for a year but not in formal residential aged care, then her former home could be treated as an ‘investment property’. Her Age Pension payment rate would be reassessed using the non-homeowner Asset Test Allowance. In March 2016, a Single Pensioner could have $354,500 of assets before the Asset Test bites.

After one year away from her own home, Mum’s Age Pension would be reassessed under both the Income Test and the Assets Test. If Mum’s house is valued at $900,000 or more then the Assets Test would exclude her from any Age Pension in March 2016.

If Mum lives with us as a Granny flat Pensioner,  does she keep her Pension so that she can pay us rent?

If Mum lives with her extended family as a Granny flat Pensioner, and keeps her Pension then she could pay some rent or board money. Having another person in the household means higher bills for food and utilities. How much  a Granny flat Pensioner pays for rent or board is a matter for the family to decide.
Also, the family need to agree the level of care that is to be provided. For example, will the as a Granny flat Pensioner be available for childminding during business hours and every evening. Later when the Granny flat Pensioner is frail, will the family provide full-time care to a demented elder.

A Granny flat Pensioner agreement could reduce the potential for misunderstandings if Mum lives with us.

As a Granny flat Pensioner agreement could set out the financial deal to apply to the Granny flat Pensioner and her granny flat hosts.  Expert advice about a granny flat agreement before a senior moves into your household lessens the risk of disagreements later.

A consultation with Christine at Financial Care Services could clarify the granny flat proposal.

Call Christine now on (03) 9808 0338 to book a consultation about your proposed granny flat arrangement.

An illustration of Mum’s ongoing Pension and other income could help set a reasonable rate of ‘financial contribution’ to the household before the senior moves in.

Early consideration of Mum’s financial position when she stops living with us could avoid nasty surprises later. Your granny flat consultation at Financial Care Services could cover the “what if Mum eventually needs to enter residential aged care for intensive nursing” and “does Mum need to change her Will to reflect the granny flat arrangement”.

Financial Care Services is an independent financial advisory service specialising in seniors in transition to new accommodation and DVA Centrelink Pensions.

Contact Financial Care Services to arrange for a granny flat consultation. You will receive the Financial Care Services’ Financial Services Guide and the Financial Care Services Granny Flat Arrangement Personal Financial Facts form.

To make an appointment for confidential, independent and professional advice about pensions, lifestyle or financial issues please contact Christine at Financial Care Services 03 9808 0338.

Disclaimer:
The information contained in this website is of a general nature only and does not constitute “financial advice”. You should obtain your own personal financial advice before borrowing or investing any money, entering a granny flat arrangement or moving in to any retirement village, lifestyle community or aged care facility.

Financial Care Services is licensed to provide financial advice to individual clients based on their personal situations.
All eligibility for Commonwealth benefits will be determined by Centrelink or DVA, based on your personal position as documented and the legislation and Regulations in force at that time.
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Contact Financial Care Services to start your granny flat discussions.