Volume 9 Edition 1 Financial Care Services Newsletter

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Financial Care Services, the specialist adviser to seniors in transition to new lifestyles

Volume 9 Edition 1 – 31 January 2019

How are the seniors coping in yet another week of hot weather?

Mature aged bodies do not cope as well in the heat as those same bodies coped fifty years ago during the 1968 drought.

Outdoor activity is best avoided on hot days. But if you must go out when the sun is hot then cover up and put on a hat.
Overheating in the hot sun could be the end of your independent walks. You might be on your way to permanent residential aged care via the hospital stroke unit and the slow to recover rehab ward.

Dehydration is a serious risk for seniors. The remedy includes drinking lots of water. Yes, the plain water straight from the kitchen tap; remember Melbourne has the best tap water in the world.
Ignoring your body’s longing for another drink of water could fast track you to a stay in a public hospital attached to a drip. Then your friendly medical team could encourage your direct admission to aged care.

If you want to stay independent for a few more years then keep your cool.

Frailer seniors who are forgetting to stay cool and drink water might benefit from a stay in “Respite Restorative Care” in an aged care facility. These places are usually maintained at a comfortable temperature and the friendly staff encourage a good fluid intake.

Aged care facilities in Melbourne generally have more beds available for Respite stays and permanent entry in the warmer months. Your frailer family members could be grateful for two weeks of Respite care in cool environment.

But before you try Respite care with a view to long term permanent care be sure to consider the costs of long term living in that aged care facility.

A consultation with Christine at Financial Care Services could spare your family from telling a senior that she cannot afford to stay permanently at the aged care facility where she enjoyed her Respite Care.

Were you thinking about inter-generational gifting?

Elderly family members might like to hand over the holiday house to the next generation. The retiring baby boomers might want to help their young adults get homes of their own. Seeing the next generation benefit from asset transfers can bring joy.

But the taxpaying public are unwilling to shoulder a greater financial burden because you chose to gift assets. Thus Centrelink are very interested in your gifting if you are claiming an Age Pension, or hoping for a Commonwealth subsidy of your aged care costs.

Remember Centrelink will count your ‘excess gifts’ in your Means Tested Amount for aged care. Thus ‘excess gifting’ is relevant even for seniors who miss out on the Age Pension. Anyone of us could be in need of residential aged care particularly those strong characters who go out in the afternoon heat.

What is gifting at Centrelink

At Centrelink, gifting is giving away an item or money, selling an item for less than its reasonable value or failing to take up an entitlement.

For example, Joe has surrendered his Driver Licence and hands his car over to his grandson, Tom. The car has a value of $7,000 but Joe does not want any money from Tom. At Centrelink, Joe has gifted an item valued at $7,000.

Eric transferred an interest in the family holiday house to his adult children. Eric retained 25% interest in the coastal property and granted his three children 25% interests. At Centrelink, Eric has transferred 75% of the value of the property for no payment.
Eric is not concerned about Centrelink’s view of his gift as he is too ‘wealthy’ to qualify for any Age Pension.
But Eric’s ‘excess gift’ is included when he suddenly needs Commonwealth regulated residential aged care two years later.

Why does gifting matter for seniors

The Age Pension is for senior citizens who are “too old to work” enough to support themselves after they have attained Age Pension Age.

But the Australian taxpayer is only going to pay Age Pensions to citizens who have few financial resources of their own. Hence the payment rates for the Age Pension are means tested. Included in the Age Pension means testing are rules about excess gifting.

Excess gifting at Centrelink

As an Age Pensioner, you may give away as much as you choose whenever you choose.
But if the total of your gifts in this financial year exceeds $10,000 then the part in excess of the $10,000 gifting Allowance will an ‘excess gift’ for the Age Pension means tests. Looking back five years from the date of each gift, any excess of your total gifts over $30,000 is also an ‘excess gift’.

The gift Allowances of $10,000 in any financial year and $30,000 over any rolling five year period are the same for single pensioners as for couples at Centrelink.

Consider Bob and Betty who downsized into a retirement village. Bob and Betty gifted $200,000 of the equity released to their daughter Bella in May 2018.
Previously Bob and Betty had only given their family small gifts. Their full Age Pensions were needed for their modest living expenses. As an Age Pensioner couple, Bob and Betty had gifted $200,000 in May 2018.
Thus the first $10,000 of the May 2018 gift is covered by the Annual Gifting Allowance for the 2017/8 financial year. Thus Bob and Betty have an excess of $190,000 commencing May 2018.

Expiry of excess gifting for Age Pensioners at Centrelink

Five years after you made a particular gift that gift ceases to be counted in the calculation of your ‘excess gifting’ amount. Your ‘excess gifting’ will expire after five years.

Consider Bob and Betty with an ‘excess gifting’ amount of $190,000 commencing in May 2018.
Their ‘excess gifting’ amount attributable to their gift of $200,000 to Bella will expire in May 2023.

Thus at the end of May 2023 that big gift stops being counted as an ‘assessable asset’ for Age Pension means testing purposes.
Bob and Betty could be eligible for more Age Pension once that ‘excess gifting’ amount has expired.

Ongoing Age Pensioners could expect Centrelink to adjust their Age Pension payment rate on the expiry of each excess gifting amount.
Other seniors could consider applying for an Age Pension five years after their last substantial gifts.

Excess gifting and the Centrelink means tests

You ‘excess gifting’ amounts are treated as ‘financial assets’ for the Centrelink means test.
Thus the ‘excess gifting’ amount will be counted as though it were additional money in your bank account.

The ‘excess gifting’ amount will be included in your financial assets for the purposes of calculating your deemed financial income for the Age Pension Income Test.
Any ‘excess gifting’ amounts will be counted as ‘assessable assets’ for the Age Pension Assets Test.

Your Means Tested Amount for residential aged care will also include your ‘excess gifting’ amounts as ‘financial assets’.

In summary, if you give away assets valued at more than $10,000 in a financial year or $30,000 over any rolling five year period then Centrelink will treat you as having the excess gifting amount in your bank account for the next five years.

If you choose to give away significant assets then you will need to live with the consequences for at least five years before the taxpayers of Australian would forget about your gifts.

In planning to be generous to your family remember to retain enough to finance your own living costs.

Financial Care Services your independent adviser

Financial Care Services is an independent advisory service specialising in retirees of modest means and aged care entrants. Our core values include working with clients in claiming DVA and Centrelink entitlements.

The team at Financial Care Services are here to answer your Age Pension questions and guide your understanding of aged care costs. Help with Centrelink challenges is available from Financial Care Services, the specialist adviser to seniors in transition to new lifestyles.

To arrange an appointment for further confidential, independent and professional advice about DVA, Centrelink, lifestyle or aged care issues please contact Christine Hopper 03 9808 0338.

Financial Care Services charges fees based on the work involved in advising you about pensions and aged care fee solutions.
To make an appointment for confidential, independent and professional advice about aged care, retirement lifestyle, granny flat or Age Pension issues please contact Christine Hopper or call +61 3 9808 0338.

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Christine Hopper
Financial Care Services Pty Ltd
Independent aged care, strategic lifestyle and Social Security advice for seniors in Melbourne, Victoria, Australia
Telephone – call +61 3 9808 0338
Email – contact info@financialcareservices.com.au
Address – mail to 172 Warrigal Road, Camberwell Victoria 3124
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Disclaimer: The information contained in this newsletter is of a general nature only and does not constitute “financial advice”.
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.