Implications of retiree giving house to daughter

[Sheryn]

This is for a friend...

Her father put a deposit on a house about 20 years ago and the daughter and her family moved in and paid off the loan over time but house is in fathers name and now he needs to change name over to daughter so that he can access Centrelink Health Benefits.

Daughter said she will have to pay stamp duty and capital gains tax but that she has receipts for 100K worth of improvements and repairs she has done over time.

My thoughts are if her Father gives the house to her without receiving fair value eg 300K in exchange he still will not be able to access Centrelink Health Benefits as the asset value will be calculated in his assets for 5 years?

Is my thinking correct or not?


Regards
Sheryn

 

[tobe]

yup, thats my thinking too.

Worth having your friend take specific advice, perhaps the lovely people at centrelink might make an exception if they can prove the daughter has always been paying the mortgage, occupying the house etc.

Doubt it though.

 

[Sheryn]

Yeah

I think my friend is in between a rock and a hard place as I doubt they have 300K to give to her father and she is the only working as hubby has had forced redundancy so no job and 60 ish and they used some of his redundancy to pay off a car loan.

 

[Scott No Mates]

Access to centrelink benefits will depend on his particular circumstances. People receiving the pension are entitled to have their own home (exempt from means test) plus cash.

If they dispose of the house at fair market value, they are entitled to have a certain amount of cash before CL payments are reduced. Gifting the house to someone will be seen as above and prevent him accessing benefits.

 

[marg4000]

If the house is in dad's name then it is an asset to him. Even if he keeps the house the value will be taken into account for any pension.

The value of the house will be counted by Centrelink as an asset for 5 years after it is gifted. But if it is in the vicinity of $300K some pension may be payable.

There are financial advisers at Centrelink and it may be a good idea for dad to have a chat to them first to review his options.
Marg

 

[Shaneelastic]

If the house is in dad's name then it is an asset to him. Even if he keeps the house the value will be taken into account for any pension.

The value of the house will be counted by Centrelink as an asset for 5 years after it is gifted. But if it is in the vicinity of $300K some pension may be payable.

There are financial advisers at Centrelink and it may be a good idea for dad to have a chat to them first to review his options.
Marg

Advisors at Centrelink generally are good, but at the end of the day their just mouth pieces. You don't see them saying "at age 60, the house should of been gifted" now do you?

Thats why they work for centrelink, not in private practise.

 

[pully]

http://www.humanservices.gov.au/customer/services/centrelink/commonwealth-seniors-health-card
by centrelink health do you mean senior health card for self funded retirees?if so see info in the link above. it would appear it is income not asset tested?

if so why does he need to get rid of the property from his assets?
maybe better to leave as is and include in his will?

there are some advantages with the senior health card as link details but not much. pensioners may have more benefits.

he needs independent advice to look at his situation before taking any action.
as has been discussed before there are many potential issues when property and family are mixed.

 

[devank]

the daughter and her family moved in and paid off the loan over time

Can't that be treated as personal 'loan' given to the dad by daughter? If so then can't he sell to his daughter for a fair value then take away that loan amount from the sale price?

 

[Terry_w]

This is for a friend...

Her father put a deposit on a house about 20 years ago and the daughter and her family moved in and paid off the loan over time but house is in fathers name and now he needs to change name over to daughter so that he can access Centrelink Health Benefits.

Daughter said she will have to pay stamp duty and capital gains tax but that she has receipts for 100K worth of improvements and repairs she has done over time.

My thoughts are if her Father gives the house to her without receiving fair value eg 300K in exchange he still will not be able to access Centrelink Health Benefits as the asset value will be calculated in his assets for 5 years?

Is my thinking correct or not?


Regards
Sheryn

This is very complex - potentially.

Any stamp duty or CGT would be based on market values.
Deeming provisions in the Social Security Act will probably mean the asset is deemed to be his for 5 years and he would be deemed to be receiving an income from it based on certain amounts.

But, it sounds like the father was acting as trustee for the daughter and her husband. What has been declared on tax returns?

(ps I wrote this response about 12 hours ago but got distracted and never pushed 'submit')

 

[Terry_w]

Can't that be treated as personal 'loan' given to the dad by daughter? If so then can't he sell to his daughter for a fair value to take away that loan amount the sale price?

Yes, it may be treated as a loan.

Care should be taken to clarrify this for other reasons too. What if one party died and other family members disagreed that it was a loan or a gift etc. A recent case which involved loans/gifts and death:
Voce v Deloraine [2012] NSWSC 1187
http://www.caselaw.nsw.gov.au/action/PJUDG?s=1000,jgmtid=161089

 

[Sheryn]

I think the problem from the fathers point of view is he is not receiving an income from an asset valued at approximately 300K and his income has been dropping with interest rates going down and he is a partial funded self retiree but unable to meet criteria to receive seniors health benefits card.

If this property was a rental he would be getting $300 a week, but I suspect daughter paid off loan and stopped making further payments years ago and he has been missing out on receiving money for the house for the last 10 years.

The house has always been thought of as the daughter's. Guess it all depends if he claimed deductions via his tax whilst working or not.

Not exactly accurate but shows what he has missed out on as he is 75 now...
$300 x 52 weeks = $15600 x 10 years = $156,000 he has not received which would have reduced his lifestyle signficantly.

 

[alexlee]

Not exactly accurate but shows what he has missed out on as he is 75 now...
$300 x 52 weeks = $15600 x 10 years = $156,000 he has not received which would have reduced his lifestyle signficantly.

On the other hand, he also didn't have to pay off the loan.

It's unlikely the rent would have been 300pw 10 years ago.

 

[greedy2000]

As the house is in her fathers name the asset would be subject to Centrelinks income and assets test.

He would be deemed to be earning an income from this asset whether or not he is actually receiving it or not.

If he does nothing, nothing changes.

If he "transfers" ownership to his daughter and "gifts" it to her, the asset will be subject to the gifting rules. And still count towards the Income and Assets test for 5 years. However from that point on he may receive a higher pension and/or qualify for a health care card.

He may be able to argue with Centrelink that they should attribute a smaller value to this asset due to his situation but he will most likely be unsuccessful.

In terms of what value the daughter should pay, well he can either get nothing "gift it" or they can agree on a value. If the father has only contributed the deposit (say 30%) to be fair his daughter should pay out 30% of the value of the home.

There are also many estate planning issues with this as well.

What would happen if the father died now? would other siblings get a right to a share of the house the daughter has paid off? is that fair?

What would happen if the father gifted the house to her? is this fair for the other siblings? as the father has contributed to the purchase of this house.

Doing nothing doesn't seem like an option.

I'd talk to a proper financial planner (not the centrelink one) and a good solicitor

 

[Sheryn]

On the other hand, he also didn't have to pay off the loan.

It's unlikely the rent would have been 300pw 10 years ago.

Agree rent wouldn't have been $300 10 years ago it was just an example of how much his spending in retirement has been restricted as he has not received any money since he retired AFAIK.

 

[Sheryn]

There are also many estate planning issues with this as well.

What would happen if the father died now? would other siblings get a right to a share of the house the daughter has paid off? is that fair?

What would happen if the father gifted the house to her? is this fair for the other siblings? as the father has contributed to the purchase of this house.

Doing nothing doesn't seem like an option.

I'd talk to a proper financial planner (not the centrelink one) and a good solicitor

Father put down the deposit for younger daughters house at a later date but put it her name.

This is a messy financial situation with no easy way out.

 

[Macca]

It seems to me that they need to get legal advice on their options for transferring to her name plus perhaps a written statement from the sister that she won't make any future claim on it.

Once they are aware of their legal options get advice from a financial planner on how each option would effect any benefits, then bite the bullet and fix it asap.

Any deferment is not going to change anything, just cost them more money when they eventually get around to it or he dies IMO