澳洲Australia property Using Parents Equity - Will It Affect The


在澳大利亚 I need some advice regarding a property purchase. Property - semi-detached house Bedrooms - 2 Condition - average needs internal reno to modernise Street - one of the best in suburb Location - excellent Close to schools - yes Transport - 50m The pool at of an IP needs to be resurfaced (or so the pool doctor says), the cost was estimated to be $10K ($10,000), after recoverying from my impresssion of a cat coughing up a fur ball, it just seems far too much. Its just a standard poo


We have wonderful parents who are allowing us to build up our investments by using their PPOR ($600K+ val). "We'd rather be part of your dreams & help with your investing than wait 'til we're dead to take advantage of us!". We're a very close & open family so we discuss everything. We've been telling them for a while if they don't spend it now, we will when they're dead. So they've graciously offered :D

They're self funded retirees and have been for years. They travel extensively, live off their super for overseas holidays and the only income is from Dad's Veteren's Pension. They're pretty much self sufficient on their hobby farm & have no other expenses or investments. Dad's old fashioned - "cash is king".

Although they'll let us do what we want with the property or equity, they want to keep the Veteren's Pension and we're yet to get advice in this regard. Thought I'd ask here first.

Has anyone had experience with this scenario?

They're 62 & 57yo. They'd like enough for us to cover an overseas holiday probably once a year, or approx $20K/pa in exchange for use of the property. They don't ask for much. They're very busy people with a very fulfilling life. We've discussed EVERYTHING including agreements between my brother & his wife aswell - "the rules" of investing together.

Some scenario's we've discussed :
- pull equity to buy IP's, keep property in their name
- transfer property into family trust, pull equity for investing

No matter what, we're not going to be giving them a lump sum. We're spending it! - that's why we think it shouldn't affect their pension.

Any ideas or experience in this regard would be great.

Thanks  

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Well... I hope both you and your parents have thought this one through fully. They are still "young" retirees and could have 20-30 years ahead...hell even 40!!! Please consider this with any financial dealings with their money.

Now the finance people are best to offer advice here but maybe your parents could draw down some equity from their PPOR and lend it to you at perhaps a very low or even nil interest rate at least if something does happen in the future they will still be financially ok.

Just my opinion :)  

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First issue to sort out is what sort of Veteran's pension your father is on. Some are means tested and some aren't. If his is NOT means tested then it does not matter what he does with his money or income. If it is means tested then you will have to be careful.

There are limits to how much pensioners (including DVA) can "gift" without affecting the pension. To put the house into a trust would be depriving your father of an asset and its value would be taken into account for 5 years.

I think you need very specialist advice - DVA would be a good place to start. Get any decision in writing.
Marg  

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Like Marg said, get specialist advice. Pensions can be affected by the slightest little thing and it may be quite easy for you to negatively impact your parents quality of life by not fully looking into it.

You also need to think through the implications of you using their equity to get ahead, especially if things don't go smoothly.  

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Kath Russell said: ↑
They're 62 & 57yo. They'd like enough for us to cover an overseas holiday probably once a year, or approx $20K/pa in exchange for use of the property. They don't ask for much. They're very busy people with a very fulfilling life. We've discussed EVERYTHING including agreements between my brother & his wife aswell - "the rules" of investing together.Click to expand...
They dont ask for much :eek: There asking for 20K per annum for use of their equity. All under the table I assume? Whats that 20K going to do to your cashflow position, or will you fund it from equity?

Also the answer is on the apropiate website if you look hard enough. I dont think anyone with that knowledge would disclose it as its personal financial advice  

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Their pension is pocket money as their super will cover them for eternity. Everything's on the table for all of us. Everything will be funded from the equity. We're all very comfortable with debt. We've all got life insurance, wills etc. The house is worth over $600K, they want say $200K over 10 years, they're ultimately giving us $400K now to play with, and use the growth to continue building our portfolios.

They'll never use the equity in the house. They're so old fashioned they just want to pass the house onto us. That's it. They know how we already use our equity now & in the past for property investing. We're big fans of Michael Yardney (Metropole) & Ed Chan and only realised after we started reading their books & using their services that we were already living their recommendations. We're actually waiting to hear back from Metropole to see if they have a client in the same situation.

The only advice we've had has been when we mention it to other Vet's or retired friends. Everyone has been negative. No-one has a positive story. We are not like most families. I have actually used their house previously for a very successful business and paid them back, with interest within two years. We just don't plan on paying them back this time! We're going to fund their fun instead.

We will certainly get the correct advice from Veterens Affairs, our accountants and advisors before going ahead with anything. We'll ensure we're all protected from each other & outside influences. We've just been through the worst tenant on the planet (if you saw my other post) so nothing will be able to penetrate us!

We were hoping we could look at a real life scenario beforehand, to give us more ideas aswell. We also invest in the stock market so will integrate income, set everything up and adjust our plans accordingly.

Thanks again  

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Kath Russell said: ↑
We have wonderful parents who are allowing us to build up our investments by using their PPOR ($600K+ val). "We'd rather be part of your dreams & help with your investing than wait 'til we're dead to take advantage of us!". We're a very close & open family so we discuss everything. We've been telling them for a while if they don't spend it now, we will when they're dead. So they've graciously offered :D

They're self funded retirees and have been for years. They travel extensively, live off their super for overseas holidays and the only income is from Dad's Veteren's Pension. They're pretty much self sufficient on their hobby farm & have no other expenses or investments. Dad's old fashioned - "cash is king".

Although they'll let us do what we want with the property or equity, they want to keep the Veteren's Pension and we're yet to get advice in this regard. Thought I'd ask here first.

Has anyone had experience with this scenario?

They're 62 & 57yo. They'd like enough for us to cover an overseas holiday probably once a year, or approx $20K/pa in exchange for use of the property. They don't ask for much. They're very busy people with a very fulfilling life. We've discussed EVERYTHING including agreements between my brother & his wife aswell - "the rules" of investing together.

Some scenario's we've discussed :
- pull equity to buy IP's, keep property in their name
- transfer property into family trust, pull equity for investing

No matter what, we're not going to be giving them a lump sum. We're spending it! - that's why we think it shouldn't affect their pension.

Any ideas or experience in this regard would be great.

ThanksClick to expand...
When you say we ,i take it you have a investment partner,what happens in a few years time "if" you or your partner wants out,happens every day,why don't you just buy the property off your parents and start from there,and as your parents are still quite young,ones health goes downhill and the need high end care,who will pay for that?? insurance does not cover everything,if you take 80% of the equity out of their property reinvest in the ASX-Property and you experience the same problems with tenants as by your previous post,or the ASX DROPS 40% again how would you be if that happens?,youhave some very smart Accountants in this site maybe have a talk to one of them,they would see this every day in their line of work..imho willair..  

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I / we = myself, my husband, my brother & his wife. We have all dealt in residental investment properties independantly and as married couples. We have not had any "business" dealings together as yet (the four of us). Unfortunately for all of us, we sold most of what we have bought in the past.............we know better now (for our long-term investing plans anyway...).

We have talked about alot of options & scenarios including if my brother runs away with a man to my hubby & I divorcing and yes, if any of us want out.

We have always known our parents plans for if & when they are unable to care for themselves (looooong way away) but believe we have covered all angles.........including a trip to a Mexican vet for Dad if he goes to a point of no return (worse case health scenario of course - see we talk about everything!). We know their plans for their super & carers costs are included.

WE'VE BEEN THROUGH SO MANY OTHER FRIENDS & FAMILY'S CRAP THAT WE KNOW HOW GOOD WE ALL HAVE IT AS FAMILY AND AS FRIENDS. It's also another reason our parents want to help us so we don't have to go through what they did - working two jobs each and saved cash. We had a great life growing up, we just don't want to work as our parents did to achieve at least the same & even better life for our own kids.

The equity we will have will be used to pay for our parents fun, investments & keep a huge buffer. We are so far looking at 6 monthly reviews of our plan, a long term plan of 5 years and extending that to 10 years. We will always re-assess where we stand at all times depending on our circumstances. Ultimately, it's long term planning, including passing on the portfolio / s, education & wealth to our children. We live quite some distance away from each other but we will always ben in contact & constantly adjusting our strategy to suit our current situations (family life, children, education, retirement etc).  

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Kath Russell said: ↑
believe we have covered all angles.........including a trip to a Mexican vet for Dad if he goes to a point of no returnClick to expand...
LMAO - must keep the "Mexican vet" option in mind, neither of my parents want to go on when it's not worth living any more, either. ;)

Normally, I'm highly skeptical about these kind of arrangements and the potential for things to go wrong, or problems that families hadn't anticipated. But FWIW, you are one of the very few people I've seen make a proposal like this who seems to have thought things through. Even if you don't yet have all the answers, I believe you're asking the right questions, so good luck to you all. :)  

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I have today received an email from Department of Veteren's Affairs & spoken to the Melbourne office. I have given them my parents details & the appropriate department is going to contact us from Western Australia in due course.

Will keep you posted.  

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WOW! Very intense & tight rulings, income / asset tests, "deprived assets", gifting information etc

It is deemed that the house my parents live in is an asset and whether they sell it, gift it, let us use equity says they then have the means to live off the proceeds so they would no longer need the pension. Their pension would be greatly affected and probably cancelled as we would be using all of the equity, minus the funds they would like to have for giving us the priviledge.

The administration staff are very helpful and VERY knowledgeable about trust & business structures. I tried everything within my own knowledge source discussing difference scenarios but they just kept saying - it's an asset, if money comes out of it in any sense, it'll effect the pension. Doesn't matter who the money goes to, it's there & available so should be used to live off so they obviously wouldn't need the pension then.

So, using their house is currently out of the question as they want to keep their pension.

I've mentioned to Dad we could be paying him more than his pension by using the equity, they still live in the house (definite non-negotiable scenario) and we still be able to use the balance for investing. We'll now look into those scenarios.

I originally thought war Veterens were paid a pension for thanks for serving their country. I'm personally pretty much anti-war & anti-pension but when it comes to putting your life on the line, watching your friends die infront of you and other friends not making it home, I believe our Veteren's should be compensated. If you are financially independant, then you don't count. You can look after yourself, according to the ruling. I can see why Dad wants to keep the pension out of principal. Still, we'll all see where this pathway takes us amongst all the other roads of life's adventure we're on.  

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Hey Kath,

We were in a very similar position...we had access to my Parents equity for a couple of years before Dad retired. He's on a DVA pension. We got a letter from our Accountant to state that the LOC against his house is used purely for OUR business expenses and has nothing to do with him except the fact its his house. In the end it affected his Pension. It gets reviewed every 2-3 months or more often if the balance on the LOC varies significantly. They wanted to know how much had been drawn down on the LOC and they would take that figure as 'income' for my Dad and reduced his Pension accordingly. Kinda sucks coz at the time (about 7mths ago) we had almost fully drawn down on the LOC but last month it was topped up again but wasn't due for a scheduled review yet but i didn't care, i gave Dad a statement to show it was topped up so he brought it to DVA and they topped up his Pension again. A bit of a hassle. We actually give Dad the difference in cash to make up for the lesser amount he gets in Pension. He said its ok for him so long as he gets to keep his healthcare discounts :).

Hope this helps!  

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Absolutely helps!

Thank you so much for your contribution. :)  

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Kath Russell said: ↑
WOW! Very intense & tight rulings, income / asset tests, "deprived assets", gifting information etc

It is deemed that the house my parents live in is an asset and whether they sell it, gift it, let us use equity says they then have the means to live off the proceeds so they would no longer need the pension. Their pension would be greatly affected and probably cancelled as we would be using all of the equity, minus the funds they would like to have for giving us the priviledge.

The administration staff are very helpful and VERY knowledgeable about trust & business structures. I tried everything within my own knowledge source discussing difference scenarios but they just kept saying - it's an asset, if money comes out of it in any sense, it'll effect the pension. Doesn't matter who the money goes to, it's there & available so should be used to live off so they obviously wouldn't need the pension then.

So, using their house is currently out of the question as they want to keep their pension.

I've mentioned to Dad we could be paying him more than his pension by using the equity, they still live in the house (definite non-negotiable scenario) and we still be able to use the balance for investing. We'll now look into those scenarios.

I originally thought war Veterens were paid a pension for thanks for serving their country. I'm personally pretty much anti-war & anti-pension but when it comes to putting your life on the line, watching your friends die infront of you and other friends not making it home, I believe our Veteren's should be compensated. If you are financially independant, then you don't count. You can look after yourself, according to the ruling. I can see why Dad wants to keep the pension out of principal. Still, we'll all see where this pathway takes us amongst all the other roads of life's adventure we're on.Click to expand...
Hi Kath,

Get back in contact with them, If your parents still wan't to gift the 400k they can, it will effect their pension however if it's anything like it is in sydney they will both have to wait 5 years after gifting to be re-entitled to the pension... if that's any help to ya i dunnoo!!

Good Luck!  

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As I said get some personal financial advice. I know of sisters in your same position.
You need to find an accounting firm that has expertise in the following, Centrelink Advice & Business Structuring. The centrelink advice would probably come from a financial planner within the accounting firm and the trusts/loans would come from the accountan.
Make sure you pay hourly for the advice as opposed to product commissions.

Yes it can happen you just need the right advisers, look at medium sized CA/CPA firms with a financial planning division  

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Thanks Nikolina - haven't heard of the 5 year rule but will check it out. They're allowed to give away $30K over 5 years without affecting their pension.

Shaneelastic - do those sisters care to share info?!

We will DEFINITELY be getting professional advice (accountants / lawyers etc) but want to educate ourselves as much as possible first so we can get our heads around it somewhat before being bombarded with new information.

Thank you. More Google......................  

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As I said in my previous post, deprived assets are taken into account for 5 years.

Pensioners can gift up to $10,000 a year without penalty, with a maximum of $30,000 in five years.
Marg  

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Spoke to Centrelink today. They have nothing to do with Veteren's Affairs in this regard so they can't help with any information. I actually rang twice as I was presuming I'd get a different answer, but no, they suggested only dealing with Veteren's Affairs, then contacting a financial advisor & accountant.

Got a letter of authority from Dad going through DVA at the moment to allow me to enquire on his file so will see how we go.  

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Mixing money and family is a recipe for problems. I don't see a desperate need here. Why not save and start your journey on your own two feet?  

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Hi Twitch

Why not save and start your journey on your own two feet?Click to expand...
Our journey has been productive and prolific for over 10 years now using not just my two feet, but my husbands and the many helpers along the way - be that family, financial JV's & business partnerships. It's been a rollercoaster ride that keeps climbing higher with bigger goals & achievements. Our last tenant is probably the only negative conduct we've been involved in in all of that time.

Mixing money and family is a recipe for problemsClick to expand...
Not in our family. We've been down this path in the past & it was a win-win situation for all of us. We used the house as security, we had a successful business, we paid them back, with interest, we all gained experience, we gained even more trust, love, adoration and encouragement for each other, and the taste of bigger and better things.

I don't see a desperate need hereClick to expand...
Not desperate, but there's over $600K sitting there doing nothing! Do the sums, there's a potential in that for a few houses, possibly millions of dollars worth of more assets that I don't have to go to work to save for.

I don't want to seem like I'm rambling or just jumping on you Twitch because there's alot of talk in this forum about dealing with family. I just want to share with you that ultimately we're all just human and with openness, honesty, trust, personal & financial growth in mind EVERYONE can win. Everyone will be protected, as well as the house. It's our family home. It's a property that will be passed through the generations and NO-ONE will be allowed to sell it. I hope you can find the same balance for yourself.

I'm grateful for all I have - good AND bad experiences :)

THINK BIG ! !  

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