Buying property from family member

Can't find anything in the search function about buying property from family members.
Our situation is our mother is needing to sell her unit which we think would realistically sell for $350k. We are trying to reduce her asset base as if she goes into low care she will lose the use of all her capital (other than $37,500). If she could sell the unit to us for a lower amount her asset base would be less. Does anyone know what the govt will allow or disallow in this situation?
 
Your Mum needs to see a financial planner. Many financial planners specialist in retirement strategies and appropriate ways to manage wealth in retirement.
 
Hi,
There are some very specific rules about this, and I think it you sell the property cheaply, then your mum could still end up being assessed as having the market value. Everything I've seen would indicate that gifting the house or selling it cheaply would put your mum into a worse position.

There are 2 things you need to consider when entering a low care nursing home.
First is the daily fees. This is based on income and maybe also assets. But rental on PPOR is not counted towards the income.
The second is the bond. This is a lump sum, paid to NH, and they take out a residual amount over a period of time, and also obviously get the interest.

Something you can consider is that the bond doesn't actually need to be paid.. you can pay the "residual" amount and an amount equal to the interest payments. Or you can combine an upfront payment, with a lower residual/ interest weekly payment. Considering that rental income on PPOR is not counted towards the income test, this can be a very cost effective way to manage the bond payment, instead of selling the house. Its certainly what we have done with my mum. It makes the weekly payments considerably higher, but means that we don't need to sell down any of her assets, and her rental income covers the costs of daily fees and the bond payments.

It really is worthwhile talking to Centrelink's financial planners, because its a bit of a minefield and quite complicated........ and obviously the NH's themselves have a vested interest, so you don't want to get the financial information from them.

Pen
 
Also, my understanding is that the bond isn't based on the residents assets or income... it is set by the NH. So, for example, Room 1a has a bond of 250K, and Room 1b might be $350K, because it has a view.

Pen
 
Bond for my Dad was $500K and weekly charge is assessed on his income, and is currently about $750 per week :eek:. He gets the same as someone coming in without a bond and who pays over most of the pension.

This is one of the things that really stinks for those of us who build up some wealth.

It is my understanding that his home (now rented out) does not count towards his income.

My understanding is that anything gifted still counts for five years as an asset, and selling cheaply is no help as it is deemed at market value.

Of course, this is my understanding, and probably not quite right, but definitely get financial advice from someone who knows what they are talking about.

We used RetireInvest and the chap we have been seeing has been fantastic and knows what he is talking about.
 
Penny K, paying interest on her assets of $360k at the current interest rate of 8.16% would be $29k pa. If she kept her unit and rented it out the income net of costs would only be $12k pa so it seems to me that selling the unit and paying up front is a better option, unless I am missing something.

The tax man has rules about gifting and penalises gifts over $10k pa or $30k over 5 years.

I will try and find info on the tax dept website about selling homes and going into aged care.

After viewing some low care facilities we really think she would not be happy there. An independent living unit within a retirement village offering low care and having access to a community aged car package may be the way to go.
In that case if she is not going into low care the rules about selling below market value may differ. ????
 
Wow, Wylie, Thats a high bond!! My mum's was 250K, I think.

Belleran, you only pay interest on the bond amount, not the full assets. So, in my mum's case, its interest on $250K. SHe was fortunate in that she entered the NH last year when interest rates were at their lowest point. The initial interest rate you enter the NH at stays the same for the whole time you are in care, which is great for her!
my mum has a portfolio of properties, all in a row, so selling one would damage the long term value, so for us it was definitely a better option. Her overall rent is enough to cover all the NH costs (about $1500/wk including daily rate and bond payments). She gets no govt assistance/ pays full NH rates. The rent on PPOR is not counted twds her daily rates, and it has the highest potential rental income. So, for her its by far the best option.

I haven't looked into any of the rules for moving into self care accommodation, so don't know about that.

Pen
 
Pennyk - In this instance the nursing home required the bond to be the total of her assets up to $500k. I am finding that many have this same system. I have come across a couple which only require about $250k.
 
You had better get good advice before your mother sells her unit below market value.

It could affect her pension as it will be counted as a deprived asset for the next 5 years, and may still affect the bond she has to pay.
Marg
 
Top