Ask Noel: Selling a house to pay off an aged care deposit
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Ask Noel: Selling a house to pay off an aged care deposit

I am 85 and live alone in the family home. My wife is sick and resides in an aged care facility where we paid two-thirds of the deposit required, paying interest on the balance. Should I die before my wife, could my daughter, who has my wife's power of attorney, pay off the balance of the deposit from her share of the proceeds from the sale of our home? Is this a good idea? My wife has no use for money.

The refundable accommodation deposit for aged care is an exempt asset for Centrelink purposes.

The refundable accommodation deposit for aged care is an exempt asset for Centrelink purposes.

Photo: Simon Letch

Aged Care Guru, Rachel Lane explains: “The refundable accommodation deposit (RAD) can be paid at any time and can certainly make sense as a strategy if the house is sold as it reduces the daily accommodation payment (which is currently calculated at 5.96 per cent a year). The RAD is an exempt asset for pension purposes. But before the house is sold you should consider what strategies are available.

"You would need to balance the option of keeping and renting out the home against the option of selling it. If you were to die, the home would remain exempt for the pension asset test for two years from the date you leave. For aged care the home would become assessable but only up to a maximum value of $165,271. Depending on your wife’s date of entry into care there are rules that can enable the home to be retained and rented with the asset and income being exempt from her pension indefinitely. Before you sell, make sure you understand all of the options and the implications.”

I am 22, studying at university while working part-time, saving $300 per week and have saved $25,000 in cash which is currently sitting in a bank account I have many goals I would like to achieve which would require me to save a lot more. However, since my money is currently sitting and earning little I feel the need to make it work for me. What's a low-risk and short-term investment that would also provide some decent returns which could at least beat the inflation rate?

Unfortunately, there is no short-term low-risk investment apart from interest-bearing accounts. I guess you can take some comfort in the knowledge that the rate doesn’t matter much if a term is short.

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My mother receives a DVA pension. I am her carer but I do not receive carers payment.

I wish to update my vehicle to a new vehicle as there is currently a run out sale on and my vehicle is nine years old and does not have a lot of the current safety features. I have money to buy the vehicle but it is in a term deposit until early November. Is my mother permitted to lend me $30,000 so I can purchase the car before November and then pay her back? It would be about eight weeks between transactions.

Yes, she can lend you the money without penalty and it should not affect her pension as the money lent will be deemed to be earning the same as it is now.

I have a question about planning for early retirement. My husband is 40 and earns $240,000 a year. I'm self-employed, 41, and earn $60,000 – 100 per cent of my earnings are paid off our home loan in addition to $4000 a month from my husband's salary. We've recently purchased an investment property which loses $4000 a year for tax purposes. We owe $250,000 on our home.

We're looking to invest in another property next year, as well as managed funds. We'd like to ease back on work in eight years, when we've finished paying school fees and paid off our home. What would you recommend as the best investment strategy for early self-funded retirement/semi-retirement? We are somewhat wary of super and don't want access to super to be restricted if the rising pension ages also affects the age we can access super in the future. I believe we have enough time to take some managed risks, and would like diversification of managed funds and property, but don't know what the split should be.

You have raised a number of complex questions and really should be talking to a good financial adviser. The adviser should carry out a risk assessment to discover your tolerance for risk, and then help you devise an asset allocation that is in line with your risk profile and your long-term goals. You have a very large exposure to residential property now, and my belief is that you should be focusing on diversifying into good share-based investments when investing for the future. This should include both local and international shares. You can get tax benefits, and keep money outside super, by simply borrowing for investment. If you take a mortgage against your home to buy shares, you should not be faced with margin calls. Just keep in mind that shares are a long-term investment and market fluctuations are normal.

Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature and readers should seek their own professional advice before making any financial decisions.