Many retirees may want to help younger family members by gifting part of their savings - potentially to help with Centrelink assessments. But if things go wrong in the future, happiness may turn to grief.
Gifting may help the children and grandchildren, but it may have significant impacts for your own future – especially if an aged care need arises.
Means-testing impacts your eligibility for government concessions, such as the Centrelink Age Pension, and impacts how much you will be asked to pay in aged care fees.
Gifting assets may not have the impact you think, as gifts are still assessable for five years if you gift more than the allowable thresholds. If you gift more than $10,000 in a financial year (or $30,000 over five years) the excess counts as a 'deprived asset' for the next five years.
If you want to reduce assessable assets, you need to plan more than five years in advance. But it is hard to predict what may happen in the future. Leaving yourself short, may increase your risks and reduce your range of care choices.
Dianne has $700,000 in financial investments, in addition to her home. She decides to gift $300,000 to family. This leaves her with $400,000 in savings, but Centrelink will continue to assess her assets at $690,000 (only reduced by the allowable threshold of $10,000). As a result, Dianne has less assets to support herself but is still being assessed as if she held that Cash. Her age pension only increases by $780 per year.
If Dianne needs to move into aged care within the next five years, the gift will also affect her means-test assessment. She will need to fund around $27,000 per year for ongoing care fees (basic fee plus means-tested care fee) plus other personal expenses and accommodation costs.
The key message is to take care before gifting, as protecting your financial future is just as important as helping family members to secure their futures. Gifting assets may leave you with insufficient resources to fund future needs or to adapt to any changes. Talking to a Retirement and Aged Care specialist to consider implications, may help you to make an better informed decision.
Call us today on 07 56 667 223 to discuss your options.
IMPORTANT INFORMATION: The information is of a general nature only and has been prepared without consideration of your individual objectives, financial situation or needs. Before making any decisions, you should consider the appropriateness for your personal investment objectives, financial situation or individual needs. We recommend you see a financial adviser, registered tax agent or legal adviser before making any decisions based on this information. Current at 1 May 2023.