Adult children and grandchildren value the family heirlooms

According to research, 56% of people aged 50 and over would prefer to begin passing on their assets while living

According to research, 56% of people aged 50 and over would prefer to begin passing on their assets while living rather than at end of their life. This may include giving away some of your treasures and memorabilia while you are alive so that you can see and appreciate how they are enjoyed by your beneficiaries.

The timing could be ideal if you are considering downsizing your home anytime soon. You or your partner can give away money, other assets or income to any value you choose at any time. Before you make a gift, you should carefully consider the effect it may have on your financial security.

You should also check how it will affect any future pension payments by contacting Human Services (formally Centrelink) or your Financial Adviser. The rate of income support payment you or your partner receives may be affected if assets are given away and the amount assessed as gifted is more than the allowable gifting amount. For example, you do not receive adequate consideration for the gift or transfer in the form of money, goods or services.

Where applicable, you need to bear in mind that giving away income can affect Centrelink payments for an indefinite period. The gifting rules apply to any gifts made in the 5 years before receiving a pension or allowance, unless you can demonstrate that you could not have expected that you would qualify for a pension or allowance. Gifts that you make are assessed to see how they directly or indirectly reduce the assets available for your personal use and whether they exceed the allowable gifting amount.

Examples of gifting include but are not limited to:

  • If you transfer your shares or units in a trust or company and do not receive full market value for them, you may be considered to have gifted them.
  • If you relinquish control of a private trust or private company, you will be considered to have gifted all the assets held by the trust or company. Allowable gifting amount;
  • A single person has a gifting free area of $10,000 per financial year, limited to $30,000 per 5 financial years.
  • A couple has a total combined gifting free area of $10,000 per financial year, limited to $30,000 per 5 financial years.
  • If the total of gifts made in a financial year exceeds $10,000, the excess will be assessed as a deprived asset. This is called the $10,000 rule.
  • A maximum of $30,000 can be gifted over a rolling period of 5 financial years, but must not exceed $10,000 in any 1 year to avoid deprivation. Only $30,000 of gifting in a 5 year period can be exempted. This is called the $30,000 rule. Any gift or gifts with a total value greater than the allowable amounts will be assessed as a deprived asset for 5 years from the date of gift and will be subject to the income deeming provisions. This may change if a gift is returned.

Other examples where gifting has occurred:

  • you own a rental property valued at $380,000 and sell it to your daughter for only $200,000
  • you bought a car for your daughter as a present
  • you are donating 10% of your wages to your church
  • you forgive a loan
  • you are required to repay your son’s business loan because you were a guarantor, or
  • you put money into a family trust that you and your partner do not control (Source Human Services)

For more information on allowable gifting, click here.

The Retirement Advice Centre is a Corporate Authorised Representative of Millennium3 Financial Services Pty Ltd ABN 61 094 529 987. Australian Financial Services Licensee Number 244252. Unit 7, 50 Borthwick Avenue Murarrie Qld 4172 The information contained in this document is general in nature and may not be relevant to your individual circumstances. You should refrain from doing anything in reliance on this information without first obtaining suitable professional advice. The views expressed in this publication are solely those of the author; they are not reflective or indicative of Millennium3 Financial Service’s position, and are not to be attributed to Millennium3. They cannot be reproduced in any form without the express written consent of the author.