Couple keeps an eye on the future

SHIFTING assets into a spouse’s name to qualify for concessions is a good idea but don’t pay out super transfer fees in the process, writes Barefoot Investor.

Senior couples should get in the swing of planning retirement.

SHIFTING assets into a spouse’s name to qualify for concessions is a good idea but don’t pay out super transfer fees in the process

 

BRUCE WRITES: I will be 65 next year and I am in good health. I have seen a financial adviser who advised me to transfer all my AustralianSuper money ($680,000) to Netwealth and to put it under my wife’s name so I can obtain a health card. We have cash and shares of $500,000 and no debts. Should I transfer at an entry fee of 4.5 per cent or stay with AustralianSuper? What is your opinion of Netwealth and the advice?

BAREFOOT REPLIES: The strategy of sheltering your super in your wife’s name to reduce your assessable assets is a good idea. You can then qualify for a pension and a concession card, which can be worth up to $2500 a year. (It gives you everything from free passes at your local tip to a cut on your rates bill and, of course, a range of concessions from the health system.) So in that sense it’s good advice. However, you’re getting legged. If your adviser is charging you a 4.5 per cent entry fee, that works out to be $30,600, and if he can get his mitts on your other dough it’ll cost you $53,100. Bruce, just so you know, right now I’m leaning back in my chair, whistling, with one eyebrow cocked. Definitely do the strategy but stick with AustralianSuper. When your adviser follows up with you, give him a whistle for me.

TOO DRAINED TO THINK STRAIGHT

REBECCA WRITES: I have just won an insurance payout after seven years. The payout will total $175,000 after my lawyers are paid. I am 27 and I earn $48,000 a year. I want to use the insurance money to build a future, but I am so exhausted and overwhelmed from the case right now that I do not know what is best to do with it. Any suggestions?

BAREFOOT REPLIES: I am so sorry for what you have gone through. It is perfectly natural to feel overwhelmed right now. You’ve spent years fighting for justice and you’ve just received a huge, life-changing amount of money. Often when people get a windfall, a lot of well-meaning people give them contradictory ideas on what they should do with the money, all of which just causes more doubt, more indecision and more stress. So I’m going to give you the same advice I give anyone who gets a major windfall: pay off any debts, stock up a three-month Mojo savings account, splurge on a well-deserved holiday, and — most importantly of all — lock the rest of the money up in a 12-month term deposit. You need to dial down the pressure and focus your energy on healing. In the meantime, we’re going to use the money in the term deposit to build up your self-confidence. When it comes to finance, you don’t have to understand a thousand things — you need to know just a few broad principles: First, no one cares more about your money than you do. Second, keep things simple. Third, focus on safety. Keep your three months of Mojo at the ready, then buy a home you can afford; also put your long-term retirement savings on autopilot by boosting your pre-tax super contributions from 9.5 per cent (what your employer pays) to 15 per cent (by adding more yourself). Then focus on paying your home off.

(The details of this case have been changed for privacy reasons. I have spoken to Rebecca and have agreed to help her over the next 12 months and beyond)

A QUESTION OF SECURITY

LESLIE ASKS: I am a 33-year-old long-term single mum with a 16-year-old son, and I am finally ready to buy my first home. I am lucky enough to be in love with my defacto partner (of 10 months), who lives with us, but am wondering if I need a “worst-case plan” to protect the house in case we separate. All the deposit savings are mine and my income is more than triple his. He is happy paying rent but could only afford around one-fifth of the weekly mortgage payments. Am I being paranoid or is it worth looking into a legal agreement?

BAREFOOT REPLIES: You should be really proud of yourself. I’m proud of you. You rock! And you are not being paranoid — you’ve worked bloody hard to get where you are, and you need to protect yourself and your son. Besides, you’ve known this dude only 10 months — I’ve had toothbrushes that last longer than that. You need to see a solicitor and get a binding financial agreement drawn up. Do this. Please.

 

WHEN DEATH DO US PART

ROBERT ASKS: In your column you often state that couples should have their money in joint accounts. What happens when one passes away? We have been advised to have separate bank accounts for just such a situation, because when one passes away all accounts with their name on it are frozen, and the surviving partner has no access to the funds. How do you overcome this?

BAREFOOT REPLIES: No, that’s not right. A bank will not freeze money in a joint account — it belongs to both account holders jointly. If one of you dies, the other would have to present a death certificate to have the account changed over to their name only, but there’s no reason they wouldn’t be able to access the money in the joint account. Still, good on you for thinking about this stuff — sorting out your affairs ahead of time is a really thoughtful, loving thing to do.

 

barefootinvestor.com

The Barefoot Investor holds an Australian Financial Services Licence (302081). This is general advice only. It should not replace individual, independent, personal financial advice

Originally published as Couple keeps an eye on the future