Dilemma with wife's parents

[Trippy]

Hi guys,

After some advice please. My wife's parent's are in their early 70ies. The mother inlaw is very frail (in hospital as we speak just broken her hip for the second time). They currently own their home and get a part pension. Both retired on a reasonable redundancy package around 12-15 years ago. They live quite frugally but this is how they are. The house they own is a 2 storey post war brick home. They have had to fit a stair climber on the rear stairs to get her up and down. Large open 1/4 acre block that the neighbors generally mow for them. I have a few concerns, namely:
1. The mother inlaw is really frail and has health concerns other than the latest broken hip
2. It would not surprise me to get a call any time advising she has passed
3. I don't believe the husband would really do well by himself as she has done everything for him over the years in respect to cooking and house cleaning

I think the house is too large for them at this stage of life and getting up and down the stairs is fraught with danger (all the living areas are on the top floor). Due to her level of mobility now any trip hazard is a real issue (even stepping out a glass sliding door to a lower drop of 5 inches is a risk for her). We have talked about us buying a place with a separate granny flat and they jumped at it. They have said they are happy to sell the house and split the proceeds between my wife and her brother. My wife's proceeds would go towards the cost of the purchase of a suitable place. Her brother would quite likely us his portion to fund his first home. I have a few concerns, namely say they sell the house and some time down the track may need full time care which we can't provide. One or both may then need to be admitted to a nursing facility at great cost. Theoretically, as they have now sold the house and distributed the funds to the kids (who have now spent it) who's going to pay for the nursing home? I thought maybe they should rent out the existing house out then pay us rent for a granny flat (we would purchase the house / granny flat from our own funds). If they then ever get in a situation where they need specific care they can sell the house to use the funds? We would be stuck with a place that has a granny flat, but have children in early teens that may use it as they get older? I'm not sure where they would stand with their pension as the rental income in and out would leave them in the same position financially as now? Any thoughts or ideas would be appreciated, thanks

 

[Aaron_C]

If you don't want to sell the house what you can do is use part of the equity in the house via a family guarantee. Use part of that equity to purchase the new place, rent out the old one, and then let them move into the new granny flat you build.

 

[DaveM]

How is your father in law's health? His next 10-15 years needs to be taken into consideration. While a house with granny flat may seem like a good idea, as you have alluded to you wont be able to provide the care required in coming years.

My suggestion would be for them to sell the house and buy a standalone villa in a retirement village that has onsite nursing home/carers/meals service for the future as well as social events for your in-laws, with the remaining funds put into interest bearing accounts to pay for the ongoing costs.

 

[weg]

Centerlink allows for a 'granny flat' arrangement that won't affect the IL's position regarding both pension and nursing home care. This amount is around 140K from memory.

For now, how about relocating a few things in the existing house, so the entire living and bedroom area is downstairs, and worry about the granny flat situation when the time comes.

Then you can sell the place, take the 140K to build the granny flat and FIL can move in. The rest of the cash can go in the bank.

I would be very hesitant of gifting because it would have negative repercussions if they required nursing home care down the track (but within 5 years I think).

As for FIL living alone there are lots of services available ie. fortnightly cleaning, heavily reduced services like gutter cleaning, yearly spring cleaning, etc.

There's 'meals on wheels', council transport pickups and drop offs to shops and other local services, social services, nursing packages, etc. The list is endless.

Ask to be referred to the hospital social worker who can immediately put you in touch with agencies that can make home modifications and supply special beds and other aids to make home living easier.

Goodluck.

 

[Trippy]

How is your father in law's health? His next 10-15 years needs to be taken into consideration. While a house with granny flat may seem like a good idea, as you have alluded to you wont be able to provide the care required in coming years.

My suggestion would be for them to sell the house and buy a standalone villa in a retirement village that has onsite nursing home/carers/meals service for the future as well as social events for your in-laws, with the remaining funds put into interest bearing accounts to pay for the ongoing costs.

Hi Dave, the father in-law is in pretty good health. I reckon he has 10-15 in him yet . I see her going in the next few years and us helping the father in-law to some degree. The other sibling is interstate and has no input as it is. I don't see us having to care for him so much as maybe him having dinner with us a few nights a week and we help out with cleaning / washing etc. As it is he rings my wife say 3-4 times day for no real reason (wants a chat). Talking to friends around our age with older parents it appears normal (even though it drives my wife NUTS ). My though is if they were on the same property it would actually be easier for us to help them (without all the phone calls ) and all would be much easier to manage? If we were not happy to have them on the same premises then they will quite likely need to look to a villa or something along that line.

 

[redwing]

My suggestion would be for them to sell the house and buy a standalone villa in a retirement village that has onsite nursing home/carers/meals service for the future as well as social events for your in-laws, with the remaining funds put into interest bearing accounts to pay for the ongoing costs.

Some of these places are not cheap, especially those with onsite nursing home/carers/meals service. Throw in ever increasing strata levies and management costs and it can get expensive, some places even have an easier entry system, but a harder exit system

i.e. if you sell in yr one 3% of the gross sale costs go back into the complex, working up to 30% gross in year 10, which apparently is the average turnaround time on these units. You would also have the selling agents fees

The Social Benefits can be great though

Retirement Villages used to be run by Churches etc, now its big business that is heavily involved

 

[weg]

Some of these places are not cheap, especially those with onsite nursing home/carers/meals service. Throw in ever increasing strata levies and management costs and it can get expensive, some places even have an easier entry system, but a harder exit system

i.e. if you sell in yr one 3% of the gross sale costs go back into the complex, working up to 30% gross in year 10, which apparently is the average turnaround time on these units. You would also have the selling agents fees

The Social Benefits can be great though

Retirement Villages used to be run by Churches etc, now its big business that is heavily involved

Agree.

I had a lady tell me a horror story involving her mother and a retirement village recently.

Her mother needs nursing home care now and is having problems finding a place because the retirement home can't sell her unit.

It's apparently been for sale for about a year but the incentive to market aggressively doesn't appear to be there because there are still monthly charges and big marketing fees, with this woman now owing thousands.

The family also had to put in a new kitchen, bathroom and carpets, and repaint the place to get it in the same condition as it was when she bought into the place 10 years prior (in the contract but worded in a way that you wouldn't think it entailed possible major renovation).

The family are anticipating the mother will get back less than she put in when she bought.

Go in with eyes open if going down that path, and beware those contracts!

 

[DaveM]

In that case forget the retirement village idea.

What my grandparents did was to buy some land and build a duplex, they sold one off as well as the main house and ended up with a large cash lump sum to pay for things like meals delivery and other associated costs of living.

Not sure if you and they are up for something like that, it may take some hunting but if you can find a new PPOR with a large yard that can be subdivided and build out the back might be an option. They live in one, sell the other, you live in front house. End up with something worth far more than a granny flat with the flexibility of selling it seperately to fund a nursing home in the future.

Hi Dave, the father in-law is in pretty good health. I reckon he has 10-15 in him yet . I see her going in the next few years and us helping the father in-law to some degree.

 

[Aaron Sice]

Agree.

I had a lady tell me a horror story involving her mother and a retirement village recently.

Her mother needs nursing home care now and is having problems finding a place because the retirement home can't sell her unit.

It's apparently been for sale for about a year but the incentive to market aggressively doesn't appear to be there because there are still monthly charges and big marketing fees, with this woman now owing thousands.

The family also had to put in a new kitchen, bathroom and carpets, and repaint the place to get it in the same condition as it was when she bought into the place 10 years prior (in the contract but worded in a way that you wouldn't think it entailed possible major renovation).

The family are anticipating the mother will get back less than she put in when she bought.

Go in with eyes open if going down that path, and beware those contracts!

all the more reason why lease for life sucks.

get a strata village - http://www.collegepark.com.au/

 

[Terry_w]

I've just completed a course in Elder Law which covered many of the issues including the granny flat cases.

There are many many things to consider such as:

- centrelink issues.
If set up properly they could still retain the pension. If not done properly they would lose it. eg. if they sold the house and gifted you the money they would lose the pension. If they sold and contributed to the construction of a GF with a life interest they could retain the pension.

- bankruptcy issues.
What if they contribute funds to 'your' house - name of title is you only. You go bankrupt. What happens to them? They can protect their interest to an extent.

- Marital breakdown
What if your marriage breaks down...

- Disagreements
What if nana wants to watch reruns of a country practice and you have a dispute, she wants to move out, but all her funds are tied up.

- Caveats
What if the parents lodge a caveat, which they could do, and you have all that equity you want to use, but they won't release it.

- Inheritances
What if there are other siblings or other othersiders who may have a claim on the will or estate.

- Going into nursing home
May be inevitable. how is the money to be funded.

- CGT
Is their property pre CGT? If so it may be best to keep it this way for as long as possible.

What are the CGT implications for you if you were to rent out part of your main residence - would it be rented or would it not be etc

=

Maybe a better way, or easier way for you to proceed is to build a GF out of your own funds and allow them to live there.

Whatever you do you will need a legal agreement drafted which tries to allow for all eventualities.

 

[softmonkey]

Seriously consider planning a transition to a nearby care facility now. Many of them have tiered levels of care, starting with a 2 bedroom unit with garage etc, meals available, through to studio rooms with a daily nurse visit, through to assisted levels of physical care. It is much easier to plan entry to the nearest and most suitable facility now than have to take a place further away in an emergency scenario.

One of the biggest regrets of my family was allowing my grandmother to continue living on her own for several years after my grandfather passed. Her mental faculties degraded sharply and by the time she entered a village she was unable to establish and maintain friendships with the other residents. We all agree we should have worked harder to convince her to move sooner.

 

[weg]

Seriously consider planning a transition to a nearby care facility now.



We all agree we should have worked harder to convince her to move sooner.

Usually it's the other way around and you try to keep people out of those places - for most staying home in their own home in a familiar environment with some of the many supports available to them (many are free or heavily subsidised) is preferable.

Anyway, I would have thought when you lose your mental capabilities to a significant extent that you require care, the last of your concerns would be establishing networks and frendships in a care facility .

I think it should always be about what the elderly parent wants, rather than what makes us comfortable.

 

[Trippy]

Centerlink allows for a 'granny flat' arrangement that won't affect the IL's position regarding both pension and nursing home care. This amount is around 140K from memory.

I checked on the Centrelink web site and it appears the amount they can contribute is fixed subject to the age of the youngest of the couple. In their case it appears they can contribute up to around $400k without loss of the part pension they receive, subject to them having a Life Interest in the portion of property they contribute for. Thanks all for your contributions and comments, we now feel we have a plan we can discuss and eventually move forward with

 

[Terry_w]

Did you see the attached document from Centrelink? Not sure if it is still current.

 

[joanmc]

My parents moved into an RSL village that has 3 levels of care: independent (they cook etc for themselves but there are emergency buttons all over the joint and care available); semi independent studios (all medications, meals, cleaning done for you) and nursing home (you're a vegetable). It is about 10 mins away from my house and has worked well so far.
They were both still very able when they moved in and have been involved in many social activities that they wouldn't have been able to access from their old home. There is a lot of companionship there. AND, most importantly- now that mum is losing her marbles there are many hands to help. It is very easy to access additional things like cleaning, shopping etc and there is emergency respite if I can't come and look after them.
Mum, when she is lucid, reckons that moving there was the best thing they have ever done, and often says she is so glad to be out of the big house.
my 2 cents.

So I would consider seeing if they want village life rather than granny flat. Might give FIL some company too. I would add- definitely check out the fine print on the contract regarding selling the unit down the track etc. We know that when Mum and dad go the last of their cash will be eaten up by the fees, but quite frankly we don't care. They are very happy there and I don't expect an inheritance. i would rather they blew the lot on themselves.

 

[Trippy]

Did you see the attached document from Centrelink? Not sure if it is still current.

Yes this is the one I was looking at last night. The way I read it: say they sell their current house for 350k they can put that full amount into another property with no loss of current pension level, regardless of the value of what they are buying into. Seem right?

 

[Terry_w]

Yes this is the one I was looking at last night. The way I read it: say they sell their current house for 350k they can put that full amount into another property with no loss of current pension level, regardless of the value of what they are buying into. Seem right?

I wouldn't like to speculate on the figure in case I am wrong. Why not make an appointment with a Financial officer at Centrelink and run through it all with them. They are very helpful from what I hear.

 

[Trippy]

I wouldn't like to speculate on the figure in case I am wrong. Why not make an appointment with a Financial officer at Centrelink and run through it all with them. They are very helpful from what I hear.

Good call, will look to make a booking and get it straight from the horses mouth so to speak

 

[Trippy]

I wouldn't like to speculate on the figure in case I am wrong. Why not make an appointment with a Financial officer at Centrelink and run through it all with them. They are very helpful from what I hear.

Terry do you know what the status quo is for the party (us in this case) receiving money from the oldies for the Granny Flat Interest. Is this deemed as income and to be taxed or is it viewed differently??

 

[Terry_w]

Terry do you know what the status quo is for the party (us in this case) receiving money from the oldies for the Granny Flat Interest. Is this deemed as income and to be taxed or is it viewed differently??

That is a good question. I don't know the answer off hand.

Giving a life interest is a capital gains tax event as is surrendering it later. If the main residence exemption applies then this may flow through.

Receiving money for the interest you are granting could be income but there would be other arguments why it may not be.