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By Melissa Jenkins
(Australian Associated Press)
It’s probably going to be among the tougher conversations you’ll have with your mum and dad but it’s one of the most important.
Discussing your parents’ financial affairs with them to ensure they are protected as they age can be a delicate conversation but it shouldn’t be avoided.
Protecting their assets, understanding how the pension works and arranging who they would like to handle their money should they be unable to are all things best worked out while they are in good health.
Seniors Rights Service solicitor Tim Tunbridge says it’s important older people understand the rules surrounding divestment of assets and how that can affect their pension entitlements.
Any verbal family agreements, such as a person selling their home and then investing and living in a granny flat on their adult children’s property, should be formalised to ensure the elderly person is protected should a relationship turn sour, he says.
“A great deal of care needs to be taken when entering into an arrangement like that,” Mr Tunbridge says.
“There needs to be independent legal and financial advice to ensure that if the relationship breaks down in the future or something unforeseen happens that the older person can get their money back.”
Mr Tunbridge said older people should also be wary of putting their house up as a guarantee for things like their children’s business ventures.
“Not only can people lose their house if the business fails but at the point where the bank or financial institution calls in the loan then Centrelink will deem that payment under the guarantee to be a gift, and they can lose part of their pension as well,” he said.
For aged pension recipients, the maximum fortnightly payment to a single person is just over $800, while the most couples can be paid is around $600 each.
However how much aged pension a person can receive depends on the value of their assets, excluding the home in which they live, and how much income they are receiving from investments.
Another important thing to plan for is the type and cost of care your parents may need and this can range from in-home support to staying in a residential aged care facility.
The cost of care, which is typically shared between the receiver and the federal government, can range from around $1,000 each year for basic at home support to tens of thousands of dollars annually for residential aged care, according to the Productivity Commission.
IT”S TIME TO TALK WITH YOUR AGEING PARENTS
– Ensure they have an updated will prepared by a lawyer.
– Arrange an enduring power of attorney. This is a legal document where your parents choose someone to manage their assets and financial affairs if they are unable to do so themselves due to illness or an accident.
– Your parents can also choose an enduring guardian, who is someone with the authority to make lifestyle decisions on their behalf if they lose capacity.
– Discuss what your parents preferences are should they need home support or other care options.
Sources: www.humanservices.gov.au/individuals/older-australians, Caring for Older Australians, Productivity Commission Report 2011, www.australia.gov.au, www.moneysmart.gov.au