Volume 10 Edition 7
Financial Care Services Newsletter
Volume 10 Edition 7 – 31 July 2020
Financial Care Services, the specialist adviser to seniors in transition to new lifestyles
Keeping busy at home in a Melbourne winter
Now that we are all staying home, we have ample opportunity to label our photographs, sort the stuff at the back of the cupboard and then focus our thinking.
Centrelink Pensioners and holders of the Commonwealth Seniors Health Card have each received a payment of $750 in July. So now is the time to think how you will use your additional cash from the Commonwealth.
You could save your money for a rainy day or just until the hardware and clothing shops reopen.
Another option could be to pay down your credit card debt; yes pay for part of what you have already spent.
Remember an Age Pension is only intended to cover a modest level of everyday expenses. Your lifestyle would need to be very frugal if you hoped to repay debt out of your fortnightly Age Pension.
You could also consider giving it away. If you collected the $750 as a Commonwealth Seniors Health Card holder and you already have adequate financial resources you might pass this Commonwealth payment on to a family member or charity.
Centrelink are interested in your major gifts.
Long ago wealthy seniors tried ‘parking’ substantial financial assets with their adult children and then claiming the Age Pension based on their low level of (retained) assets. The family understanding was that the parents would be able to maintain a comfortable style of living by having their ‘parked’ money repaid in regular instalments.
In response to such contrivances, the Centrelink gifting rules were enforced.
You may still give away as much as you like whenever you like from your own resources. Caution, you cannot give away the assets of someone else whilst acting as that person’s Attorney.
However whenever Centrelink look at your case, any major gifts in the previous five years will be included in your data.
Please keep reading even if you are too young or too wealthy for an Age Pension.
Anyone, you and your partner included, could be at risk of losing your physical or mental balance and then needing Commonwealth subsidised and thus Centrelink means tested ‘help to stay at home’ or residential aged care.
These gifting rules also apply to the means testing of subsidies for new entrants to Commonwealth regulated aged care facilities and ‘home care packages’.
What is a gift at Centrelink?
The simple example of Centrelink gifting is the fifty dollar note in your birthday card from granny.
Forgiving a loan from the Pensioner to a family member is also gifting at Centrelink.
For example, if granny loaned her daughter $25,000 to buy a new car, granny could forgive $10,000 of the loan and have that $10,000 treated as a gift at Centrelink or DVA.
Transferring ownership of an asset for less than its market value is gifting at Centrelink.
Grandpa might not be ‘gifting’ if he had a newish car registered in his name and he allowed his daughter to drive it on condition that she took Grandpa to his medical appointments and did his shopping.
But if Grandpa transferred ownership of the car to his daughter then Centrelink would count the transfer as a gift. The amount of Grandpa’s gift could be assessed under Centrelink gifting rules as the market value of the car on the day that it was transferred.
Transferring assets to a family trust for the benefit of the grandchildren could be gifting at Centrelink. Similarly paying the school fees for your grandchildren could be gifting at Centrelink or DVA.
Transferring assets to a family trust that could benefit yourselves might be Centrelink gifting or Centrelink might count the trust as an ongoing part of your assets.
Transferring all or part ownership of the holiday house to your children would be a substantial gift.
Hint: Always keep detailed records of any gifts of more than $1,000.
Consider gifting the beach house at least five years before you reach Age Pension Age and long before you might become frail in mind or body.
Centrelink gifting and ongoing treatment of gifts
Centrelink understands that seniors are still generous people. The Centrelink gifting rules provide for gifts not exceeding $10,000 in any financial year or $30,000 over any rolling five year period, to be treated as normal expenditure, like electricity bills.
The amount of a gift above these limits is treated as an ‘excess gift’ at Centrelink. For the five years after the Disability Support Pensioner or Age Pensioner made an excess gift, Centrelink treat the excess gift amount as an additional ‘financial asset’.
For example, Sue had been an Age Pensioner for many years and given only small amounts to her family as birthday gifts. Sue inherited $200,000 and chose to gift $25,000 to her son. Centrelink would count $15,000 as an ‘excess gift’, that is, the full amount of the gift less $10,000 ‘gift allowance’.
For Age Pension means testing purposes, Centrelink treat Sue as having total ‘financial assets’ of $190,000 comprising her bank account balance of $175,000 plus the $15,000 of excess gift.
Excess gifts at Centrelink expire after five years.
Once five years have elapsed since the date of your gift, that gift would cease to be counted as part of your ‘financial assets’ at Centrelink.
Help to understand how your proposed gifts impact your Age Pension
The calculation of your Age Pension amount, if any, can be challenging. The impact of your past and potential gifts adds more complexity.
Before you promise another gift you could consider the impact on your Age Pension. An Age Pension Illustration Consultation’ with Christine Hopper of Financial Care Services. could help you.
Ask Christine for the Age Pension Illustration Personal Data form as a checklist of essential data and then arrange for an Age Pension Illustration Consultation’ to look at the impact of your proposed gifting.
You will also receive our Client Services Guide that provides essential information about Christine Hopper of Financial Care Services.
Aged care entry after Centrelink Gifting
Any excess gifts during the five years prior to entry to residential aged care count as ‘financial assets’ for the purposes of calculating the Means Tested Amount on entry to permanent care.
Remember the Commonwealth only subsidies aged care accommodation for Low Means aged care entrants. You can only apply for Low Means status before you enter permanent residential aged care.
Therefore only frail seniors who have quite modest Means Tested Amounts at the time when they need to go into permanent residential aged care qualify for subsidised aged care accommodation.
A substantial gift during the five years before entering residential aged care could result in the new resident having insufficient resources to finance her aged care but ineligible for a Low Means placement.
Ask Christine Hopper of Financial Care Services. to help you look at the costs of residential aged care before you select a placement.
Deferring permanent entry to Commonwealth regulated residential aged care could allow those past gifts to expire from your Centrelink record. Private aged care homes, SRS in Victoria, could offer quality care for a weekly fee; no ACAS required and no Centrelink means tests.
Exiting a granny flat arrangement within five years could be gifting at Centrelink.
Centrelink gifting rules allow for an Age Pensioner to pay a substantial amount, the ingoing contribution, towards the cost of providing permanent accommodation in someone else’s home.
The Centrelink gifting and granny flat requirement is that the Age Pensioner acquires a lifetime ‘granny flat interest’ in the new home. Thus, the Age Pensioner is entitled to live in the granny flat (or another equivalent place) for the remainder of her life.
If the granny flat arrangement ceases for any reason, the Pensioner could be considered to have gifted the ‘ingoing contribution’ to the host.
A granny flat arrangement could cease because the host’s personal situation changes and they move on.
Other granny flat arrangements cease because the granny flat resident becomes physically frail and/or demented and needs residential aged care.
If the granny flat resident needs residential aged care within five years of paying the granny flat ‘ingoing contribution’ then Centrelink could count the ‘ingoing contribution’ as a gift when assessing her Means Tested Amount on entry to permanent care.
The ‘excess gift’ part of the ‘ingoing contribution’ might be enough to disqualify the former granny flat resident from a Low Means placement. The aged care entrant might not have the money to pay a lump sum for aged care accommodation nor the income to cover Daily Accommodation Payment in addition to the Basic fees due each month.
Careful consideration of potential aged care needs when negotiating a granny flat agreement could avoid problems when residential aged care is needed later.
Where can we get help with our granny flat agreement?
Christine at Financial Care Services is an independent adviser experienced with granny flat arrangements.
Christine also understands the fee scales for Commonwealth regulated aged care, Centrelink Age Pensions and DSP, and the DVA means tested Income Support Supplement.
A consultation with Christine at Financial Care Services could help you clarify your granny flat proposal and consider the potential aged care and Pensions implications of your proposal.
Contact Financial Care Services now to arrange to arrange a granny flat consultation. Call Christine now on (03) 9808 0338 to book your granny flat appointment.
Christine at 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 Christine Hopper at Financial Care Services, the specialist adviser to seniors in transition to new lifestyles.
Christine has neat handwriting just right for inserting your data into small printed spaces. She helps clients complete Centrelink forms.
Christine could help you with collating your supporting documents and then mailing your form to Centrelink.
Assistance with completing the Commonwealth aged care means testing forms is available to clients of Financial Care Services.
Christine 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 costs, granny flat or Age Pension issues please contact Christine Hopper or call +61 3 9808 0338.
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
Website – visit financialcareservices.com.au
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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.
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