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The Ultimate Mistake- Pensioners Beware!

At Roy A McDonald and Lindale Insurances we believe in sharing information about problems experienced in an effort to spare you from the mistakes of others. This week we had a meeting with a client that had some family members with aged care needs. You may think this is not a problem. They were simply trying to help a loved one out of a spot. Guess again…

Our new client was referred by one of our strategic alliances because their pension had been reduced. The reason that it had been reduced was because they borrowed money against their home to pay the Refundable Accommodation Deposit for a parent entering an aged care facility.

What didn’t make sense to the strategic alliance or the client was the money was not actually theirs but the banks because the loan was secured by the clients home. The subsequent loan to the loved one was treated like an asset by Centrelink as the home is an exempt assets.

One of our financial planners followed up with Centrelink for this client. We called their specialists and got the ruling on this.

What was the outcome from Centrelink?

Here is the response from Centrelink:

“…Unfortunately the loan has been taken out against an exempt asset so cannot be offset, whereas the money they paid for the aged care is seen by Centrelink as either a gift (less $10,000 if no gifting in the current period with the remainder held for 5 years and deemed) or the full amount is held on their record as a loan and deemed until repaid.  Please note that once repaid the gift/loan will be cleared and their age pension rate will be restored provided that they use the funds to repay the mortgage loan…”

What’s the learning from this experience from our client?

The first thing we suggest is to run decisions past us before you lose your pension or your income is affected.

Each situation is different and we are able to get a ruling for you before you make an error.

Remember each client is different. The question about what is the best strategy for you can be determined by the financial and emotional impact. The bottom line is contact us on 03 9848 5933 and we can have either a confidential discussion in person or over the phone. The first 15 minutes is complimentary or until we start giving personal advice.

Readers are encouraged to consult their adviser for advice on specific matters. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice and consider a Product Disclosure Statement.Lindale Insurances Pty ltd ATF Lindale Insurances Trust ABN 27 027 421 832 is a corporate Authorised Representative of Millennium3 Financial Services Pty Ltd AFSL 244252