Should I sell my home to help my three children buy a house?

I am 74, single, and still have a mortgage after raising four children. I have approximately $1 million in equity in my home. One of my children already owns a home and is financially secure, but the other three need help following broken marriages. They each have some super and savings and earn good incomes, but housing where they live is becoming unaffordable. Is there a sensible way for me to help them get into the housing market while I am still alive?

Tread carefully – you are relatively young and may have 20 more years to live, and you do not want to put yourself into a position where you are unable to fund your aged care costs in your 90s.

I don’t see a reverse mortgage as a viable option so the only practical way to raise significant funds would be to sell the house, which would involve considerable buying and selling costs, including stamp duty, then pay off your mortgage and give some of the proceeds to your children.

Even if you did this, I doubt the money you could give them would make much difference when spread across four people, and it would also mean moving to accommodation that may not be nearly as good as what you are living in now.

If I have a non-lapsing binding beneficiary nomination in place with my superannuation fund, is the fund legally required to pay my superannuation balance to the nominated beneficiary upon my death? Are there any circumstances in which the fund could decline to follow that nomination?

Leigh Mansell of Heffron says that if your non-lapsing binding nomination has been made correctly and complies with the fund’s trust deed and governing rules, the trustee is generally required to follow it. However, there are situations where this may not occur.

For example, a reversionary pension may take precedence over the nomination, or the trustee may be unable to comply if doing so would breach superannuation law – such as where the nominated beneficiary is no longer a spouse, dependant or in an interdependency relationship at the time of death.

There are also cases where the beneficiary chooses to disclaim their entitlement, or where the fund’s rules allow the trustee and beneficiary to agree to vary how the benefit is paid.

A disclaimer is not something to be taken lightly. It requires legal and tax advice, must be documented formally by deed, and must be done promptly before any benefit is accepted. It is also all or nothing – you cannot disclaim part of an entitlement – and once made, it is irrevocable.

Importantly, once a disclaimer occurs, the trustee may exercise any discretion available under the fund rules, so the outcome may not be what was originally intended. The ability to disclaim can also extend to the legal personal representative of the estate, with the consent of the beneficiaries.

My wife and I are directors of our private limited company, which is the trustee of our SMSF. We have recently retired – I am 80 and my wife is 77 – and will wind up the company soon. Last year we received pensions from our SMSF of $80,000 and $40,000 respectively, and we each received $10,000 in dividends from our company. Is it correct that receiving income from both our company and our SMSF would make us ineligible for the Commonwealth Seniors Health Card? Our SMSF balances in pension phase are approximately $1,223,000 and $760,000 respectively.

I can’t see why you would not qualify. Eligibility is based on your adjusted taxable income (ATI) plus deemed income from any account-based income streams. Under the current rules, the income limits are $101,105 a year for singles, and $161,768 a year for couples combined.

To qualify, you must be at least 67, satisfy the residence rules, and not be receiving an income support payment from Centrelink or the Department of Veterans’ Affairs. The deemed income from your super is $62,324 a year, so your ATI would have to exceed $99,444 to lose eligibility.

I own a holiday home that has never produced any income, but I understand it will be subject to capital gains tax when sold. For age pension purposes, should I assess the value of the property net of the potential capital gains tax, or must I declare its full market value given that it has not yet been sold?

The property for Centrelink purposes will be assessed at its current market value. As I understand it, Centrelink sets that value from real estate information available. There is no provision to consider unrealised capital gains.

If there is a loan against the property, secured by a mortgage over that property, the loan value would be deducted for Centrelink purposes.

Noel Whittaker is author of Retirement Made Simple and other books on personal finance. Questions to: noel@noelwhittaker.com.au

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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