managing disability
Financial planning and management takes on a whole new meaning if you or a family member is disabled due to illness or injury. Here are some important issues to consider.
Finding a cashflow
Having a disabled family member can put considerable emotional and sometimes physical strain on those around them. Depending on your financial situation, it can also put a significant strain on your household budget. More...
Maximising eligibility for disability entitlements
Having a family member with a short or longer term disability presents many challenges - physical, mental and financial. While there are a number of support systems provided by the government to help you cope with a change in lifestyle, it’s important to ensure you maximise your entitlements. More ...
Providing for a future without you
A family member with a permanent disability presents a day-to-day challenge for their carers. And, depending on their medical condition, if they outlive their carer this presents a whole new set of challenges. Will they be provided for adequately when their carer isn’t around? Where will the money come from and how can you be sure they’ll receive it? More...
A special trust for succession planning
This article discusses a trust that you can establish for the purpose of succession planning. Special Disability Trusts are one way that parents and immediate family members can prepare for the future care and accommodation needs of a family member with a severe disability. More ...
To discuss the above or any other financial matters in greater detail please contact us.
Finding a cashflow
Having a disabled family member can put considerable emotional and sometimes physical strain on those around them. Depending on your financial situation, it can also put a significant strain on your household budget.
Faced with mounting medical bills, a significant outlay to modify the family home, or even a hungry mortgage, people inevitably look to where they can find some cash to ease the strain. While financial opportunities may exist, you need to be wary of unintended consequences.
Loss of income is a common occurrence when someone close to you is unable to cope without assistance from another family member or a carer. In many cases it’s a double whammy – the person who has lost mobility or other function/s and can no longer work and their partner also has to stop working, or shift to part-time work to look after them. Inevitably people ask themselves, “Why didn’t I take out insurance when I had the chance to?” Or perhaps, “I thought I was adequately covered for this.” Or even, “I had some life insurance but I didn’t think twice about income protection.”
Where do you look for some relief if your insurance cover isn’t adequate? Can you sell an asset, like a rental property for example? If you have such an asset it would be tempting, but it may not be the best idea. For starters, the rental income provides you with a regular cashflow. And selling the property will not only take a while, at least 2-3 months, but will attract capital gains tax. On balance you might walk away with a smaller amount than you need, not to mention the opportunity to cash in on the property in years to come as part of your retirement plan.
In these situations people sometimes look at superannuation, assuming they’ve accumulated enough at that point. It is possible to access a super benefit on hardship grounds, but like the property sale mentioned above, there can be other, unintended consequences if you go down this path.
For example, it could have an impact on Centrelink eligibility. And there will be a tax impact, based on the age of the person accessing their super. Delving into super savings could also have longer term retirement funding consequences, especially if one family member is likely to significantly outlive their partner with the medical condition.
Addressing your cashflow is not as simple as it sounds. If you’d like to explore your options, or other aspects of your family’s financial future, you may find a discussion with Outlook Financial Solutions worthwhile. An Outlook financial adviser is someone who will understand how to help you or your family, given your unique circumstances.
Click here to find out how you could maximise your cash flow.
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Maximising eligibility for disability entitlements
Having a family member with a short or longer term disability presents many challenges - physical, mental and financial. While there are a number of support systems provided by the government to help you cope with a change in lifestyle, it’s important to ensure you maximise your entitlements.
There are allowances and payments available to eligible recipients through Centrelink – either for the family member or to someone who cares for them. These include the Disability Support Pension, Newstart and Mobility Allowances as well as Carer Payment and Carer Allowance. Family members directly affected, or those caring for someone, may also be eligible for a Pensioner Concession card or a Health Care Card. These offer a wide range of concessions including medicines, transport, rates and power bills.
The Centrelink website contains a host of information about the allowances and pensions people can be eligible for, but it’s very easy to be overwhelmed by this. Finding your way around the site can be challenging and it can be easy to overlook something that’s relevant to you or your family. With some tests offering exemptions if you meet certain conditions and others not applying to you if you’re already receiving another kind of payment, it can be confusing.
Working out your entitlements, is easier said than done. Eligibility for Centrelink payments is usually subject to a number of tests and these are based on your income or your assets. To maximise your eligibility for payments it’s important to understand how Centrelink assesses your income and assets and how to structure your affairs to take full advantage of this. For example, you may be able to access your super benefits tax free if you are permanently incapacitated and cannot return to work. However, you should consider the impact on potential Centrelink benefits as a result of withdrawing funds from super.
In addition, you may also be entitled to a Total and Permanent Disability (TPD) lump sum payment or Total and Temporary Disablement income payments (where 75% of your working salary can continue to be paid to you) if you hold TPD or income protection inside or outside of super.
If you’re unsure about your eligibility, or how to best position yourself financially to maximise your entitlements, you may find a discussion with with an adviser worthwhile.
Click here to find out how you could maximise your Centrelink entitlements.
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Providing for a future without you
A family member with a permanent disability presents a day-to-day challenge for their carers. And, depending on their medical condition, if they outlive their carer this presents a whole new set of challenges. Will they be provided for adequately when their carer isn’t around? Where will the money come from and how can you be sure they’ll receive it? In this article we look at a couple of ways you can set things up now so that in the event of your death your family member can continue to receive financial support long after you’ve gone.
Binding death nominations
These are nominations you can set up that legally bind the trustee of your super fund to pay your benefit to a specific person or persons in the event of your death.
If you don’t have a Binding Death Nomination (BDN) in place, your super will be paid into your estate and there is a risk that it may not be distributed as you’d intended. To give you greater certainty about who receives your payout, a BDN gives you the opportunity to nominate who will receive your super. It can also provide a more tax-effective way of distributing your estate. Setting up a Binding Death Nomination is straightforward. Talk to your super fund to get things started. If you have more than one super fund, this may be a good reason to consolidate your super into one fund, along with the fees you’ll save.
Reversionary pensions
You can also choose to have one of your dependants as your reversionary pensioner in the event of your death. This means that when you die, your super fund will continue to pay the remaining balance of your pension account, as a pension, to the person you have nominated. You must nominate your reversionary pensioner before your pension commences and nominations can generally not be changed once your pension begins. You can only nominate a child as a reversionary pensioner if they are either:
- between age 18 and 25 and financially dependent on you immediately prior to your death; or
- permanently disabled
Once your child reaches 25, any remaining balance would then be paid as a lump sum amount, unless they are permanently disabled. If this is the case, it will continue as a pension until it runs out.
We don’t like to think about life after us, but when someone in the family needs lifelong care it’s important to put some things in place for them when we’re no longer there for them.
Click here to understand how insurance works for you.
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A special trust for succession planning
This article discusses a trust that you can establish for the purpose of succession planning. Special Disability Trusts are one way that parents and immediate family members can prepare for the future care and accommodation needs of a family member with a severe disability.
The main advantage of this kind of trust is that it allows you and other immediate family members of the beneficiary who are over age or service pension age, to concessionally ‘gift’ money up to a combined amount of $500,000. The other benefit is that the beneficiary receives a Centrelink Assets Test exemption of up to $563,250 (annually indexed).
Immediate family members can be natural parents, legal guardians, adoptive parents, step parents, grandparents or siblings.
It’s a good idea to speak to a financial or legal adviser about this option, as a Special Disability Trust must meet a number of conditions and contributing to one can affect your financial security or social security entitlements.
Conditions include having only one beneficiary who meets the eligibility criteria, being ‘protective’ in nature, and providing only for the beneficiary’s accommodation and care needs. You’ll also require a trust deed, an independent trustee and annual financial statements.
To be eligible as a beneficiary, your family member must meet the definition of ‘severe disability’ as defined by Centrelink, e.g. for someone aged 16 or over, they would qualify for a Disability Support Pension and not be working, or ever likely to earn at or above the minimum wage.
If you’d like to find out more about this option, or any other provisions you can make for your family’s future, you may find a discussion with Outlook Financial Solutions worthwhile. An Outlook financial adviser is someone who will understand how to help you or your family, given your unique circumstances. Outlook specialises in finding solutions to help people achieve their goals - regardless of their current financial circumstances, or stage they’re at in life. This covers anything from advice on one small issue, through to a complete investment strategy, or a full financial plan. For more information, call 1300 669 445.
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