Article of Interest on Wills & Estates

HELPING THE CHILDREN 

Ken and Karen both aged 66 had 2 children, David and Daphne. Daphne was married with 2 children and lived a stable and secure life.

David, on the other hand, led an unstable life. He suffered health problems and several failed relationships. Ken and Karen wanted to help David and purchased a small house with their modest savings, in their name for him to live in. He paid nominal rent for occupation of the house, which was used to pay the outgoings on the house.

Everything was going reasonably well for everyone.

However, the house kept appreciating in value and was now causing Centrelink problems for Ken and Karen, significantly reducing their pension each year. This is a relatively common dilemma, without an easy solution.

If they gave the house to David there would be significant stamp duty implications because the property was now valuable.

Any gift to David would expose David to a claim under the Family Law Act if his relationships continued to break up. This wasn’t ideal.

The gifting of the property to David does not eliminate the property from assets for the purposes of Centrelink payments. The value of the house will still be taken into account over a 5 year period, notwithstanding it has been transferred to David.

This is a classic example of the old adage of prevention being better than a cure. If Ken and Karen had sought legal advice from a Lawyer experienced in Estate Planning, the purchase of this house should have been seen in the context of an overall plan involving a Will and providing for both of Ken and Karen’s children after their death.

What seems like a really good idea at one particular time may not necessarily turn out the way you thought it would.

Get Estate Planning advice prior to making a financial commitment to help your children. It needs to fit into a whole plan for your financial security as much as for the financial security of your children.

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