Mr & Mrs Jones (71 &72) own a house on Sydney’s Northern Beaches worth $5 Million as well as a holiday house on the North Coast worth $2.5 Million, both with no mortgages, as well as $5 Million in Superannuation. They still own and run their highly successful business.
Their eldest son is currently looking to purchase a house in Sydney’s North Shore. To help him with this, they have decided to gift $500,000.00 towards this purchase. To do this, the clients have decided to enter into a Reverse Mortgage on their property in the Northern Beaches for this amount, and access part of his inheritance before his parents have died. They want to be able to see their son enjoy their financial legacy.
This money could have been taken out of their Superannuation, however, leaving it in their Super Fund will provide them a far greater return on investment than the interest on a Reverse Mortgage will cost. Due to their strong financial position, they do not receive a pension. Therefore, the gifting of this money will not affect any social security they receive. As the Reverse Mortgage allows repayment, they intend to pay off the Reverse Mortgage within the next 5 years with the income generated from their Superannuation and family business.
They intend to repeat this process again for their younger son when he is able to purchase a property.
(Names and Suburbs have been changed to protect the identity of our clients.)