Complex Situation, Need advice.

[hayden2705]

Hi, Firts time poster, i hope someone has come across a similar scenario.

Ok.

My parents are retired and on the pension. They have a main residence and an investment property. They paid $40K for the investment property in 1992 and have lived in it for 9 months back in 2001, current market value $320K.

They want to help me but we have hit some hurdles.

My idea was to borrow $160K against the property, pay my 2 brothers $40K cash each and spend the rest on the property (Extensions) so myself and kids can live in it. The poblems my mother has raised, she knows a little but is pretty straight up and down is that if they do that, they will lose pension money etc and all these other hurdles she kept on bringing up.

Anyone have any ideas that i could put to her. They are only netting atm about $20 a week from the property after repaymenst on a small loan she has kept against it to offset the rent received or something.


Thanks.

 

[alexlee]

What do your parents get out of this? I can see how you benefit, but what's in it for your parents?
Alex

 

[The Y-man]

Anyone have any ideas that i could put to her. They are only netting atm about $20 a week from the property after repaymenst on a small loan she has kept against it to offset the rent received or something.


Thanks.

A small loan??? Either that or the interest is incredibly high or the rent is incredibly low to be netting $20 a week!!

Cheers,

The Y-man

 

[markxr6t]

Not sure if I've understood your situation properly, but if you're asking about their family home, contact Centrelink and ask them about their "Gifting" rules and "Granny Flat" Rules. If your parents give up the title to their home in exchange for lifelong tenancy (legal contract) they can maintain their full pension. Its not something I'd personally support, but it is an option.

If you're talking about the IP they will lose their pension under Centrelinks "Gifting" rules. To avoid this, you can perhaps borrow the money, pay out your brothers, improve and live in the house and (either or both) ask your parents to change their will as appropriate or put a caveat on the title deed outlining the extent of your claim. Either way will involve whole of family agreement and engagement of legal professionals as you want to avoid family disputes down the track.

 

[hayden2705]

The market rent is $300+ per week, but they only rent it for $150 to a realtive atm, so as to look after them and not eat into the pension.

The problem i may face is getting a bank to lend to me when i'm not on the deeds.

 

[The Y-man]

The market rent is $300+ per week, but they only rent it for $150 to a realtive atm, so as to look after them and not eat into the pension.
.

......ok...........let's leave that one or the moment....

The problem i may face is getting a bank to lend to me when i'm not on the deeds.

A no-doc loan can be taken out against the prop, an on lent to you by your parents...

Cheers,

The Y-man

 

[lizzie]

The market rent is $300+ per week, but they only rent it for $150 to a realtive atm, so as to look after them and not eat into the pension.

i soooo don't get this - they're happy to give up nearly $8,000/yr because it might affect their pension ... so how much pension would they lose with this extra income? anything under $8,000 and they have rocks in their heads.

anyhow - would an option be for you to purchase the property off your parents, at and agreed-with-your-brothers market rate to avoid any sibling in fighting, with a vendor mortgage back to your parents?

that way, instead of getting rent, they are your "bank" - all legally drawn up, of course - you pay them the mortgage payments, get full title and it's then your choice what you do with the place (rent, develop, live in).

 

[hayden2705]

Trying to avoid the $100K CGT.

 

[Pushka]

Also, I would expect that Centrelink would not agree that they should be renting to a relative at below market rent - they should be setting a market rental rate, just as they do with deeming interest rate - I am surprised they have let them get away with so far!
Your parents need a proper financial planner.

 

[Welcome]

i soooo don't get this - they're happy to give up nearly $8,000/yr because it might affect their pension ... so how much pension would they lose with this extra income? anything under $8,000 and they have rocks in their heads.

Ditto those thoughts.

If they were to obtain market rent for the place they would get $7800 more in income and by a rough guess they would loose between $2,000 - $3100 in pension??? This would of course depend on the loan size for the property, the higher the loan the less they would lose. I am guessing they have refinanced and borrowed more against it since they bought it, if getting $150pw but netting $20. It would also depend on their other income and assets but if they are already loosing 60 cents for every dollar above the income threshold their pension would already be small so would be better of with the market rent.

 

[hayden2705]

Anyone suggest a savvy Financial planner in the Newcastle/Hunter valley area?

Thanks.

 

[lizzie]

not a financial planner - but i have a brilliant and very savvy (property, shares, struture and otherwise) accountant. would that help?

 

[Big Aussie]

I don’t really follow what you’re saying, but I gather that you want to kick out the relatives and move into the IP? Then you also want to extend/renovate the IP for you and your children?
The answer to that part would be for your parents to borrow the money for the renovations, and increase the rent (to you) accordingly. That should keep them sweet with Centrelink, as they still won’t make much money. It shouldn’t cost you any more as you will still effectively be paying all the loans and outgoings.

Without knowing why you want to give your brothers $40k each, it’s hard to answer that part. There’s no point trying to pay out their “inheritance equity” in the IP. If it’s to compensate them because you’re getting below market rental, then the best way would be for you to slip them a few bucks each month, or better yet do their washing or babysit their kids etc.

Family arrangements are fraught with potential misunderstandings, especially after one or both of your parents passes on. You all need to be very clear on what your parents are trying to do for you, and what the residual result is meant to be after they’re gone, and it DOES need to be clearly documented. This is especially true if your parents are aiming to give you something now, in return for a reduced stale in the inheritance.