Ask Paul: I'm on the pension and want to help my son buy a flat
Dear Paul,
I am to receive an inheritance of $250,000 and am currently on a couple's part age pension.
My husband and I would love to help our son buy a two-bedroom flat.
We could either give him the money to avoid stamp duty (he'd be a first homeowner) or we could put it in all our names (maintaining some ownership and options when we downsize), but then it would be counted as an asset and we would lose the part pension.
My partner works part-time, earning $11,000pa. Suggestions? Thank you! - Mary
This sounds like a pretty simple question, Mary, and if it did not involve your part age pension, it would be.
Let's start with the easier bit. Helping kids out with property ownership is common. This is no surprise. We are all aware of the cost of housing and the dramatic impact of increasing life expectancy.
It often surprises people when I mention that our age pension system started in 1908. Our leaders at that time decided
that a male aged 65 could be eligible for a pension.
This was mainly because male life expectancy was 58 and they figured that not many people would get a pension.
If you'd told them back then that in 2024 males would have an average life expectancy of about 81 and women 84,
they would have thought you were a lunatic.
I'm 69 and certainly very keen on living longer, but it does mean inheritances are delayed, often until our kids are getting
close to retirement themselves. No wonder parents are considering an 'early release' of a future inheritance to help them now, when it is most needed.
As you are only receiving a part pension, as well as your partner's income, you will have other assets and I am assuming you own your home. Regardless of this, the first step for you and your partner is to review your financial situation.
Once you have done that, and decided you can afford to use the $250,000 to assist your son, how do you best do that?
This is such a big decision. I'd encourage you to seek professional advice so that your whole situation can be assessed before you move forward. I think an expert, with complete knowledge of your situation, will have better ways of doing this.
But a basic strategy may be to utilise the 'deprivation' provisions in our pension system, which allow you to gift $10,000 a year up to a maximum of $30,000 over a rolling five years.
This could be one way of helping your son while taking part-ownership of the property as tenants in common.
Helping your son to own a home is a really generous thing to do, but my overriding concern is that you and your partner are financially secure, in particular if you lose your pension. This is the time for professional advice.
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