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An important conversation

All / 01.11.2018

None of us likes to consider our own mortality. For our older loved ones, it’s an even more confronting topic and difficult to discuss.

When Lindsay became ill, his family’s priority was to support him through his treatment, and keep him positive and as comfortable as possible.

Typical of his generation, Lindsay had always been very private, never sharing personal information – not even with his nearest and dearest. After he passed away, it dawned on the family that nobody knew whether Lindsay would have preferred cremation or burial. At such an emotionally charged time, the question caused quite a dispute.

As parents, we aim to have open dialogue with our children over issues like drugs, sex, etc. But as our parents age, difficult discussions around medical arrangements, Wills, money, etc, are usually put off until something occurs to trigger the talk. Often, by then it’s toolate, which is why it’s so important to communicate while you still can.

Once Lindsay’s funeral was over, the family faced more complex questions: did Lindsay have a Will? Was there any insurance? What investments and assets did he have? Trying to locate Lindsay’s paperwork and make sense of his finances became a nightmare.

If only someone had asked him.

What should you talk to your parents about?

If you think about all those things you’d rather not discuss you’re off to a good start.

Before the conversation, consider:

  • Finances, assets, investments, accounts, insurance policies, etc
  • Will:
    • Is it current?
    • Where is it kept?
    • Who is the executor?
  • Medical:
    • Medications
    • Power of attorney
  • Funeral preferences
  • Aged care arrangements, family home, care facilities
  • Location of important documents
  • Usernames and passwords for online accounts
  • Contact details for doctor, financial adviser, trustees, power of attorney, solicitor, executor, etc.

Before opening any dialogue, consider your approach. These are sensitive topics; introduce them gently and tactfully. It may be helpful to involve their executor, financial adviser or accountant.

During the conversation:

  • Extend an invitation

Invite your loved one to express their feelings and articulate their wants. Present the discussion as a means to making their life more manageable. Stress that you’re not taking over, but that you care and that they are in control.

  • Present an example

Use examples of challenges faced by others, explaining that you hope to avoid the same situation. Tell them you’d like to help them organise their paperwork to provide peace of mind and a plan for their future.

  • Support independence

Point out that you’re not reducing their independence but ensuring they maintain their independence as long as possible.

  • Don’t judge

As your loved one opens up, listen respectfully and without judgement. Encourage discussion around their choices so you can understand and help implement them.

Afterwards, follow up and fulfil any promises you made.

Finally, just when you think your job is done, have the same discussion with your children, only in reverse. Be clear about what you want and why you’re talking to them.

Children don’t want to think about your mortality any more than you do. They’ll think you’re overreacting and probably won’t thank you for the information – not right now anyway. But that’s the nature of kids.

The main thing is that when your time comes, they’ll realise you’ve saved them a lot of heartache.

 

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

 

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

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Aged Care for those on the land

All / 25.10.2018

Arranging aged care can be stressful, but when it involves someone who is a farmer, unique circumstances apply. If your loved one is a farmer on his or her own land, would you know how best to help?

Farmers – often a husband and wife team – may continue working well past retirement age because farming isn’t just a business – it’s a life.

As a family business, the farm might be passed down to the next generation so when considering aged care, questions over whether to retain the assets or to sell them can be daunting and emotional. It’s possible that the options available will be limited by the cost and level of care required.

Aged care costs

Looking at aged care in general, costs vary considerably and residents may be asked to pay the following:

Daily fees. The basic daily fee is set and regulated by the federal government to cover meals, laundry, cleaning, etc. An additional means-tested daily fee may also apply.

Refundable Accommodation Deposit (RAD). This is subject to the resident’s assets and income and is fully refundable. A resident may choose to pay the RAD in full or in combination with Deposit Accommodation Payments (DAP) applying to any unpaid portion. RADs are usually paid from the proceeds of selling the family home. When the family home is a farm, it can get complicated.

Back to the farmers

According to the Australian Government, assets are defined as, “Most of the things you own…” Although different rules apply to properties greater than two hectares of which the owner is putting to effective use, eg. farming. The buildings, equipment, fencing, livestock, etc on the property are considered assets, and their assessment may deem the farmer wealthy, potentially increasing the cost of care.

One of the most pressing issues farmers face when considering aged care is what to do with the business itself. If the decision is made to dispose of the assets by selling or gifting, alternative problems may arise.

Seek professional guidance

A financial planner can help determine the most appropriate course of action while considering the family’s plans for the future of the farm and its assets.

When making arrangements on behalf of an older relative you must ensure that the appropriate Powers of Attorney are in place. Speak to your solicitor; or ask us for a referral.

This is an emotional decision for anyone, but when your home is your work and you’ve worked hard to keep it over generations, deciding what to do next is just that little bit harder.

 

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.


Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

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Is it time to update your Will?

All / 18.10.2018

Estate planning ensures that when we die, our assets can be passed promptly and tax-effectively to the people we love or the charities we support.
As life changes, your Will should be updated to reflect those changes.

Many events can trigger a need to review your Will, such as:
• Marriage or entering a de-facto relationship;
• Divorce;
• Changes in the family such as births and deaths;
• Adult children entering or leaving marriages or de-facto arrangements;
• Death of a person who plays a key part in the estate plan such as the executor.
Is it time to update your Will?

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.


Disclaimer

Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

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8 Pearls of Financial Wisdom

All / 16.10.2018

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The rules governing gifts from SMSFs

All / 10.10.2018

There are now almost 600,000 Self-Managed Superannuation Funds (SMSFs) in Australia where the members of the fund are also the trustees. These trustees are responsible for running the fund according to the superannuation rules. If they get it wrong, the consequences can be dire. Each year, SMSFs lose their concessional tax allowance because the trustees recklessly or persistently ignore the rules.

The superannuation rules aim to ensure that superannuation is for your retirement and is not used for other purposes or invested recklessly. One rule bans a fund from giving financial assistance to members of the fund or their relatives. Whilst this sounds simple, it pays to understand how the rule works.

Who counts as a relative?

The list of relatives in the rules is long and includes everyone you would expect including parents, grandparents, children, siblings, uncles and aunts and nephews and nieces.

The rules also prohibit schemes where financial assistance is provided to a non-relative who then provides support to a relative. Attempting a scheme like this is asking for trouble because it shows you knew the rules and were trying to get around them.

What is financial assistance?

Transactions that are banned by the rules include the following:

  • Gifts and loans;
  • Selling an asset to a member for less than its value;
  • Buying an asset from a member for more than its value;
  • Buying services that are unnecessary or at inflated prices;
  • Providing a guarantee or security using fund assets.

Some examples

  1. A SMSF holds works of art and the trustee gives a painting to his daughter as a birthday present. This obviously breaks the rules. If the trustee paid market value to the fund for the painting, he could then legally make the gift.
  2. A SMSF owns a workshop that is leased to a business run by a member of the fund. The business has cash flow problems and misses the monthly rent payment. No action is taken to recover the debt and the fund is therefore providing assistance to the member.
  3. A SMSF buys a printing machine and leases it to a business run by the members of the fund. When the lease expires, the business buys the machine from the fund at market value plus a margin to compensate the fund for the use of the money. This transaction is effectively a loan to the members and breaks the financial assistance rules.
  4. A SMSF owns a block of land and the trustee sells it to her son at the market price. The son arranges to pay for the land in 12 instalments. Apart from exposing the fund to the credit risk that the son may default on the loan, the transaction breaks the financial assistance rule.

These are only a few examples of what you can’t do as a trustee of a SMSF. To reduce the risk of making an honest mistake, most trustees work with professional advisers to ensure they legally enjoy the flexibility and control that a SMSF offers.

The rules are many so if you’re not sure, please make sure you consult your financial adviser or SMSF specialist before you do anything.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.

 

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

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10 Tips to Have a debt free holiday

All / 04.10.2018

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Is a DIY Will kit enough?

All / 27.09.2018

Is a DIY Will kit enough?

More than 45% of Australians don’t have a valid Will. If you die without one, your hard-earned wealth (your estate) will be distributed according to the rules of intestacy – a government-determined formula. That may not divide your estate as you would like, and if your family consists only of distant relatives your assets could end up enriching your state government’s coffers.

If that’s convinced you that a Will is a good idea, how do you go about making one? There are three main options:

Engage a solicitor

Using a solicitor to prepare your Will, particularly one who specialises in estate planning, is most likely to deliver the desired result. If your situation calls for anything more than the most basic of Wills, for example if there is a family business, disabled dependents, or complex family or financial structures, an estate planning lawyer will be able to provide advice on how to best structure your Will.

The downside is the upfront cost. This can range from a few hundred dollars for a straightforward Will to several thousand dollars where the situation is more complicated.

Use a trust company

There are public or state trustees in each state and territory, as well as a number of private trustee companies. They are specialists in preparing Wills and can also act as the executor of an estate. A private trustee will charge a few hundred dollars to prepare a Will, and the estate will be charged a fee when the trustee performs the role of executor. Some public trustees will waive the fee to prepare or update a Will if they also act as the executor.

Do it yourself

Will kits are available from newsagents, post offices, the Internet and other sources. Doing it yourself certainly appears to be the cheapest option, but if something goes wrong, the cost of putting things right may dwarf the initial savings.

Common problems with DIY Wills include:

  • Ambiguous wording that may need to be ruled on by a court. Fixing this can cost big dollars.
  • The Will is not properly signed or witnessed. This can invalidate the Will.
  • The Will covers only part of the estate. The remainder will be dealt with under the rules of intestacy (ie. your state government decides).
  • The Will contains unenforceable or unreasonable conditions, such as leaving out a gift to an entitled beneficiary. This can also lead to expensive legal bills.
  • Business ownership issues may be overlooked or not properly addressed.

Involve your financial planner

Your financial planner can’t prepare a Will, but as the professional most likely to have a detailed overview of your financial and personal circumstances, he or she is often the person best equipped to identify estate planning issues, and to brief your estate planning lawyer.

Your adviser may also be able to refer you to an estate planning expert, and work with them to create a Will that will deliver a smooth transfer of wealth at a time of great personal distress for your loved ones.

For more information or to speak to one of our Financial Advisers – please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances
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To gift or not to gift? What about your pension?

All / 19.09.2018

With Australia’s age pension being subject to an assets and income test, a simple way for part-pensioners to increase their pension payments is to give away some assets.

Not surprisingly the government is on to such an obvious strategy. It’s called gifting, and while it is perfectly legal for you to give away whatever you want whenever you want, if you exceed the relevant limits, Centrelink will continue to assess, what it calls “deprived assets”, for five years.

The limits

Gifting is defined as giving away assets or transferring them for less than their market value. Limits are the same for both singles and couples.

If you give away less than $10,000 within a single financial year and no more than $30,000 over five consecutive financial years, Centrelink will disregard these gifts.

Any gifts in excess of the allowable amount will be assessed as an asset (and, where applicable, subject to the income test) for a period of five years from when the gift was made.

Planning ahead

These rules don’t just apply to existing pensioners. They also concern anyone who is applying for the age pension, as recent retiree Frank discovered.

Frank has reached age pension age and based on his current assets and income he should be eligible for a part pension. However:

  • Four years ago he gave his daughter one of his cars, valued at $25,000.
  • At the same time he gave his son $25,000 in cash, to match the value of the car.
  • Two years ago Frank sold a beach house on the open market for $210,000. This was $40,000 less than the initial valuation from the estate agent.
  • In the past year he spent $35,000 on home renovations and $15,000 on an overseas trip.

What does this mean for his pension assessment?

The money spent on renovations and holidays count as normal living expenses, not a gift. Likewise, with $210,000 being the best offer Frank received for his holiday home after it had been on the market for a couple of months, the property would not be considered to have been disposed of for less than its market value.

Whilst he understands that the money he gave to his son is clearly a gift, Frank’s biggest surprise is the treatment of the car. Four years after he gave it to his daughter it’s about to be treated by Centrelink as an asset Frank still owns.

That means Frank gave away $50,000 in one year. The annual ‘Gifting Free Area’ is $10,000, so the difference, $40,000, will be counted as an asset for the next year. This will reduce his pension by more than $100 per fortnight.

If Frank had thought about his pension five years before he was eligible to apply for it, he could have achieved a better outcome.

Seek advice

To gift or not to gift? It’s an intricate question. The right answer depends very much on personal circumstances, so talk to your financial planner. He or she can help you work through all the issues, including the complex calculations of the impact of multiple gifts over several years.

For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6621 8544.


Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.

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How might divorce affect insurance cover?

All / 13.09.2018

How might divorce affect insurance cover?

More than 45,000 Australian couples divorce each year, and almost half of those divorces involve children under the age of 18. Thousands of de facto relationships will also come to an end. Regardless of the type of relationship it is a time of great emotional stress.

This stress is intensified by the need to negotiate financial settlements, and with the focus on immediate needs such as funding new living arrangements and paying day-to-day expenses, it can be difficult to think about less pressing financial issues, such as insurance. There are, however, good reasons why personal insurances should be attended to as early as possible.

Ask for support

First of all, ask for support. Stress and good decision-making rarely go hand in hand. If you have a trusted friend or family member who can help you take an objective view of your situation, ask for their help and support through the process.
Early on, take professional advice. A financial planner can guide you through many of the financial aspects of divorce, including insurance. It is crucial that you and your loved ones remain properly covered at all times.

Review beneficiaries

Check who is listed as the beneficiaries on your current life insurance policies. Don’t forget to check if you have life insurance via your superannuation fund. Change your nominated beneficiaries if necessary. One option is to direct that any death benefit be paid to your estate. It will then be dealt with under your Will. That said remember to update your Will, too.

Check your priorities

If you are of working age your most valuable asset is likely to be your ability to earn an income. Safeguarding this via income protection insurance should be a high priority.

If you have financial dependents (usually children) life insurance should also be a high priority. This pays a lump sum upon death that can be used to pay off debts and provide for future living expenses. If, post-divorce, you don’t have any dependents, you may not need this type of cover.

Total and permanent disability insurance pays a lump sum if you meet the policy definition of being totally and permanently disabled. It should be considered, whether or not you have dependents. It is often bundled with life insurance.

The other personal insurance to consider is trauma insurance. This pays a lump sum if you develop one of the medical conditions specified in the policy. It is designed to help with medical and recovery costs.

Strike a balance

While insurance premiums add to the financial stresses associated with relationship breakdown, the consequences of not being properly insured don’t bear thinking about. Your adviser can help you work out a balance between effective cover and affordability.

Knowing you have the right insurance in place to protect yourself and your dependents means there’s one less thing to worry about, so insurance should be dealt with in the early days of divorce or separation. Your adviser can guide you through.

For more information or to speak to one of our Financial Advisers – please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances
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Early Access to Super

All / 13.09.2018

Early Access to Super

We all know that our superannuation is there to provide for our financial needs in retirement. That means we can’t usually access our super until we reach preservation age and meet a condition of release.

 

Preservation age is between 55 and 60, depending on date of birth. It is the age at which you can access the preserved components of your super. However, if you are under 65 that access will also depend on whether you have retired, terminated an employment arrangement, or commenced a transition to retirement pension.

There are, however, several reasons why you might want or need to gain early access to your super. If you have an unrestricted non-preserved component to your super, you’re in luck. This can be withdrawn at any time. Just be aware that some tax may be payable on the withdrawal.

Trying times

Beyond that, early access to super is only available if you find yourself facing really tough times. Superannuation law is quite specific as to what these are.

  • Compassionate grounds, including:
    • Paying for your own medical treatment or that of a dependant;
    • Making a loan repayment to avoid loss of a house;
    • Paying costs associated with the death of a dependant.
  • Severe financial hardship. This provision is available if you have been on eligible government income support payments continuously for 26 weeks and can’t meet immediate and reasonable living expenses. The maximum payment is $10,000 and only one withdrawal is permitted in any 12-month period.
  • Terminal medical condition. This requires certification by two registered medical practitioners. The benefit must be paid as a lump sum and is tax-free if withdrawal is within 24 months of certification.
  • Temporary incapacity resulting from a physical or mental medical condition. The benefit comprises regular payments that are taxed as a normal super income stream.
  • Permanent incapacity. This applies if it is unlikely that you will ever work again in a job you are qualified to do by education, training or experience. The benefit can be taken as an income stream or a lump sum, and is taxed according to the different tax components.

Beware of illegal early release schemes

Unfortunately, schemes offering help in gaining early access to superannuation continue to pop up. These often involve the establishment of a self-managed superannuation fund and target people who are under financial pressure and who have a poor understanding of superannuation rules.

The promoters of these schemes charge high fees before disappearing. The victims end up facing massive fines or imprisonment, and often discover that their identities have been stolen.

Expert help

While applications for early release can be made directly to your superannuation fund, the best place to start is with your licensed financial planner. Aside from a helping hand at a time of major stress, your adviser will be able to identify other financial issues that may need to be addressed, including insurance claims, and eligibility for social security or assisted living.

If you find yourself in this position, or a loved one needs professional guidance in this area, contact TNR Wealth Management.

For more information or to speak to one of our Financial Advisers – please contact TNR Wealth Management on 02 6621 8544.

Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances
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