Concern over finances when one of us dies

I AM 83 and my wife is 78. We own our home and receive a pension of $250 each fortnight based on our total assets of $670,000.

Last year, our taxable income was $25,000 each, which was tax-free, and we also received franking credit refunds totalling $6800.

What would be our position if one of us died, both under the existing rules, and under the new rules proposed by Labor?

In each case, the survivor would become subject to the rules for a single home owner and would lose any pension, as the assets cut-off point for a part-singles pension is $556,500.

Under the existing system, the survivor would retain the franking credits of $6800 but, under Labor’s proposed changes, that person would lose the franking credits as well as the pension.

You should get some estate-planning advice and arrange your wills so that enough of your investment portfolio is bequeathed to others to ensure the survivor stays under the assets test. Then they could keep a part-pension and the franking credits, irrespective of who wins the next election.

IN A recent column, you said only $1.6 million in a super fund can go to a beneficiary. What happens to the balance?

The rest will be paid to the beneficiary as an after-tax payment. They can invest it how they wish, but not in super. This means earnings will be taxed at their marginal rate.

I AM in my late 60s and have been living in a friend’s home for several years. A recent change in circumstances means I will soon be moving out. I’m looking to buy a small apartment for about $275,000 and am wondering about the best way to finance it.

I receive $1500 a fortnight from various pensions and income streams as well as having $250,000 in super from which I draw down the 5 per cent I’m required to each year. I have about $40,000 in the bank. The super fund returns around 3 per cent a year from a cash option.

Should I tr y to get a loan for as much as I can at a rate of 4 - 4.5 per cent and use money from my super to make up the shortfall, or would it be preferable to use a larger percentage of my super as a deposit and take out a smaller mortgage?

The biggest problem you’ll have is getting a loan to buy a house at your age. I think your first job should be to talk to a

‘I am looking to buy a small apartment for about $275,000 and I am wondering about the best way to finance it’

couple of mortgage brokers and see what they recommend. You will need to prove you have the capacity to service the repayments and have enough in super or other assets to pay off any residual balance when the time comes.

Keep in mind that costly mortgage insurance will be incurred if you don’t have at least a 20 per cent deposit.

Noel Whittaker is the author of Making Money Made Simple and other finance books. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Email: noel@noelwhittaker.com.au