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Trive Advice Team

Spot the Difference?

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Retirement villages

As the client does not own the unit that they live in, Centrelink needs to use a different set of rules than homeownership to determine if the client is a homeowner or not. The rules are similar to those that apply for a granny flat arrangement.

If the client pays an entry contribution of more than $216,500 (the difference between the homeowner and non-homeowner asset test threshold) they are a homeowner and the value of the entry contribution is an exempt asset when determining their Centrelink entitlements. Deprivation rules do not apply and do not need to be considered.

If the entry contribution is less than $216,500, they are a non-homeowner and the value of the contribution is counted as an assessable asset (but not subject to deeming under the income test).

If assessed as a non-homeowner, the client may be eligible for rent assistance in relation to the service/maintenance fees paid to the village operator.

 

Land lease communities (over-50s parks)

Land lease communities are becoming an increasingly popular option for retirement living and an alternative to retirement villages. They are similar to a retirement village, but the legal structure is more like a caravan or transportable home park. This creates different consequences and outcomes for clients.

Land lease communities are regulated by State governments under the relevant manufactured homes or caravan parks acts. No guarantees are provided by the government and the government does not regulate fees.

The Park operator owns the land. Residents buy the building and pay a rental site fee for the land that their building sits on. Effectively this means they own the home but rent the land. They usually have to buy the home through the park operator from selected options.

The deferred management fees payable in retirement villages generally don’t apply. If the client decides to leave the park, they may not be able to rent the home as only approved owner-occupiers may be allowed. But clients may be able to choose to sell their home through the park management or real estate agent (depending on contract) and keep all the capital gains or incur all the capital losses upon sale.

The legal arrangements and contracts can still be complex, and clients should see legal advice.

Centrelink assess the client as a homeowner because they own the home. However, because they are also paying rent for the land, they could be eligible for rent assistance if this amount is more than the minimum threshold and the client receives a Centrelink / DVA pension or allowance.

 

What does all this mean?

 

Centrelink/DVA implications – Without financial advice to understand the differences and strategies to structure assets and income correctly, the resident/s may receive a lower age pension entitlement.

 

Age Pension rates and income test thresholds are current to 19 September 2021. Centrelink asset test thresholds that apply:

For full pension For part pension
Single homeowner $270,500 $588,250
Single non-homeowner $487,000 $804,750
Couple homeowner $405.000 $884,000
Couple non-homeowner $621,500 $1,100,500

Income test thresholds that apply:

For full pension per fortnight For part pension per fortnight
Single $180 $2,085
Couple $320 $3,192

 

The role of the financial adviser is to help the customer understand the financial implications of their choices and the best way to structure the selected arrangements to manage cashflow and overall net wealth. Ultimately, it is the customer’s choice which way to proceed as it is not just about the bottom line.

Please give me a call on 0437 377 873 or email me at sharon@trive.com.au

The Former Home

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Moving into aged care may have most of their wealth tied up in the family home.

For a couple, major decision include:

  • Should the spouse stay in the family home?
  • Should the spouse downsize and move to a more manageable property or perhaps a retirement village or in permanent care as well?

For a single person, the decisions can be more complex because they may need to use the capital invested in the home or rental income from it, to fund their new accommodation in the residential aged care service. A major decision becomes what to do with the former principal home? 

The decision process needs to take into account the financial as well as emotional implications.

The diagram below highlights a range of issues that should be considered when comparing the outcomes of the available options:

The role of the financial adviser is to help the clients understand the financial implications of their choices and the best way to structure the selected arrangements to manage cashflow and overall net wealth. Ultimately, it is the client’s choice which way to proceed as it is not just about the bottom line.

Please give me a call on 0437 377 873 or email me at sharon@trive.com.au

What does a financial adviser do?


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It’s a question that I’m asked all the time and my responses can be different depending upon what I’m actually specialising in.

Thought I would explain with my personal story…

I met with a mother, daughter and granddaughter the other day.

The mother had just sold her home and moving in with her daughter. All were really worried about meeting a financial adviser as they were unclear of what a financial adviser can help them with.

Anyway, the story about her financial position, Centrelink implications, granny flat provisions, financial advice, etc became quite irrelevant to my story as it was what happened following our meeting is what my story is about.

The daughter called me the very next morning just to thank me.
She explained how relieved they were to find someone like me and I responded with “I haven’t done anything yet?”.

She went onto say how her mother does not open up to anyone quite so freely and how I was able to get all of this other information that even her own family didn’t know about.

She said that from this meeting, they were able to have open and honest discussions as a family before I provide them with financial advice.

This made me realise something very important about what a financial adviser does and has nothing to do with the technical aspect of what a financial adviser does at all?

To me, it’s being able to be empathic to their situation, not sympathetic or making judgements.

It’s being able to delve down deep to retrieve core problems and these qualities, I believe, cannot be taught as I think its embedded in my DNA.

I’m so lucky and grateful to be in a profession that requires these unique qualities.

So, this is what a financial adviser does!