Many retirees may want to help younger family members by gifting part of their savings. But if things go wrong in the future, the joy may turn to grief.
Gifting may help the children and grandchildren, but it may have significant impacts for an older person’s own future – especially if an aged care need arises.
Means-testing impacts your eligibility for government concessions, such as the age pension, and impacts how much you will be asked to pay in aged care fees.
Gifting assets may not have the impact you think, as gifts are still assessable for five years if you gift more than the allowable thresholds. If you gift more than $10,000 in a financial year (or $30,000 over five years) the excess counts as a deprived asset for the next five years.
If you want to reduce assessable assets, you need to plan more than five years in advance. But it is hard to predict what may happen in the future. Leaving yourself short, may increase your risks and reduce your range of care choices.
Example
Betty has $700,000 in financial investments, in addition to her home. She decides to gift $300,000 to family. This leaves her with $400,000 in savings, but Centrelink will continue to assess her assets at $690,000 (only reduced by the allowable threshold of $10,000).
As a result, Betty has less assets to support herself. Her age pension only increases by $780 per year.
If Betty needs to move into aged care within the next five years, the gift will also affect her means-test assessment. She will need to fund around $27,000 per year for ongoing care fees (basic fee plus means-tested care fee) plus other personal expenses and accommodation costs.
The key message is to take care before gifting, as protecting your financial future is just as important as helping family members to secure their futures. Gifting assets may leave you with insufficient resources to fund future needs or to adapt to any changes. Financial advice to consider implications may help you to make an informed decision.
Christine Swanson is qualified professional adviser who can help guide you in making smarter financial decisions. Book an appointment today!
This information is of general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, you should consider whether the information is correct and appropriate in light of your particular objectives, financial situation and needs.
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© Aged Care Steps Pty Limited, 2023. Used with permission.
