‘Can we cut five of our kids out of our will, while gifting our home to one son?’

Q. We have a house that’s only worth around $120,000, and we have $28,000 owing on a mortgage. We are both 70. My partner has four children, who have not had contact with him for 10 years. I have two, and my daughter has told me she never ever wants anything to do with me again. My son is the only one who has been consistently caring, in touch, and thinks I’m the best mum ever. We both have wills that out the offspring that don’t care, but it seems this may not be enough. My son has suggested that we sell/gift him the house, and we live in it rent-free. He’s even helped us in the past two years with paying the house expenses, worth around $1,000 a month. This would secure the assets for him, but would there be a complication?

A. You are in a common predicament. Many parents with estranged children who they have disinherited worry about whether that child will successfully contest their will. You and your partner have five estranged children so this increases the odds of a challenge to the will as there are so many eligible candidates.

You have rightly identified one solution to this – leaving nothing in your estate. It makes a certain logical sense that, assuming your home is your only asset, if you were to gift it to another person while you are alive, there will be nothing left to fight over when you and your partner die. But beware, because you ask would there be a complication to doing this? There certainly would be.

There are at least two potential problems.

1. If you are on an Age Pension, gifting an asset can affect your eligibility to continue to receive the pension. The most you are able to currently gift without affecting your pension is $10,000 in one financial year; or $30,000 over five years (but this can’t include more than $10,000 in any year).

While you own it, your home is an exempt asset for assessing your pension. But, once you gift it to someone, it turns it into an assessable asset and Centrelink deems that you still have it even though you’ve given it away.

2. Giving away your major asset will significantly deprive you of your ability to meet the unknown future financial demands you may have. The biggest one is where and how are you going to live in the future? Gifting your home may deprive you of the ability to fund your future accommodation.  What if you or your partner needed to move to aged care?

You need to seriously consider the cost/benefits of giving away your home. Is it really worth it just to stop any potential challenge to your will when you go to heaven or is your life on earth more important?

It would be wise to seek legal and financial advice before gifting any of your assets or funds to your son to protect your interests into the future. You may live for a long time yet and even get a message from the Queen at the appropriate time! “

If you have a question for Starts at 60’s money experts, email it to [email protected]. 

IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.