When it comes to more elderly clients, it’s better to make life choices when you are able, not when it’s forced on you.

This applies to accommodation as well as financial choices.

Tasks such as de-cluttering, and choosing a home that will suit your future physical limitations, rather than a short term fix, is best made when you can cope with the accommodation change.

There is a massive opportunity now, with Government incentives when building a new home, for those well into retirement, to design and build a low maintenance home.

There is also an opportunity for project type builders, to design a home with a wide hallway and entrance, level floor plan, no step up into a shower and with hand rails in appropriate positions.

There are also opportunities for younger people when designing a home to consider the merit of a teenage retreat that can also double as a granny flat if the care of an elderly parent is likely in the future.

There are provisions when it comes to the acquisition of lifetime care and accommodation or the right of occupancy, that the purchase cost does not count as a gift by Centrelink. For example if a pensioner pays to a family member what is determined as a reasonable amount to acquire that accommodation.  The “reasonableness” is a formula based on the age of the pensioner.

Pro-active considerations

When dealing with a couple on age pensions, I often give them the reality check of what the survivor would have to face financially on a single pension or no pension at all and how this can be addressed.

An even bigger challenge is understanding how aged care assessment works and what that might look like if the last surviving member of a couple needs to enter aged care.

Estate Planning

This is a topic that some lawyers think they own exclusively while others work with the client’s accountant or financial planner to make sure all are on the same page.

The preparation of a Will is the domain of Lawyers but the complexities of age pension, aged care, capital gains tax, death benefit tax on superannuation are too often overlooked when a Will is prepared. 

Age pension consequences and aged care costs for the survivor of a couple can also be addressed with some smart strategies in the way a couple’s assets are distributed via a Will.

This is particularly the case when there are strong family relationships.

Accountants and financial planners have a role in estate planning that ought to be considered before Wills are prepared for clients who might have Centrelink or tax considerations. 

Death benefit tax on superannuation pension proceeds is often overlooked which can be a costly mistake for ultimate beneficiaries. 

Pension Funds

Pension funds established before 1st January 2015,  provided there were Government benefits being paid at that time, are grandfathered with respect to the income test assessment for age pension and the means tested fee for aged care.

This may or not be an advantage as it depends on how much is involved and whether the income test or asset test is prevailing.

However, when there is potential death benefit tax applying to a fund, unless there is a clear advantage in keeping the pension fund alive for the survivor, changing to a joint investment account might be a better solution, as it takes care of any potential death benefit tax while still offering decent medium to longer term returns.

More often than not, the only question that will be asked by those preparing a Will is whether there is a Binding Nomination in place.

The questions that ought to be asked is how much is the potential death benefit tax and if there is potential death benefit tax, is the pension fund still an appropriate solution with respect for either tax, aged care or pension efficiencies?

Depending on those answers, the estate planning advice might well be an account operated as joint tenants, so that the survivor inherits without need for probate. 

A phone call to the product provider to determine how much of the balance is made up of taxable components is a good start.

The applicable tax is 15% plus medicare levy on the taxable component, if paid upon death to a non- financial dependent. 

A pension fund that has been neglected and not subject to regular strategy review, should not be forgotten.

The lesson from all of this, is being pro-active to have reviews that ensure the financial house is in order as changes in life stages approach, rather when they suddenly become confronting. 

Alan Tickle

Local Financial Planner, Jonathon Tickle, from Your Heritage Financial Planning, urges those elderly people having to undergo a Drivers Licence Test, to insist on a photo ID card from RMS if they are unsuccessful in obtaining a licence.

Those who are entering care but with a current licence are also urged to obtain a photo ID card before they go into a care facility. 

There are so many occasions when ID is needed for financial transactions or updating information, but an expired drivers licence is not acceptable. 

The photo ID card solves that problem.

Your Heritage Financial Planning have written to the Member for Myall Lakes calling for automatic issuance of photo ID based on RMS drivers licence records  upon surrender of a licence. 

Anyone over the age of 16 can apply at the RMS, for a photo identification card. 

Your Heritage Financial Planning Pty Ltd(330480) Authorised representatives of Alliance Wealth ABN 493161647006 AFSL 449221 

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