4 minute read
FINANCIAL CHALLENGES for couples
BY SOPHIE DOYLE, RETIREMENT AND FINANCIAL AGED CARE SPECIALIST
With people living longer, there’s a growing trend to form new partnerships later in life. This can stem from various reasons including relationship breakdowns or the loss of a spouse. A new relationship can lead to rediscovering love, bring companionship and support, but it may also bring financial challenges.
Second marriages may present additional financial challenges when balancing day–to–day expenses with implications for aged care funding and estate plans. You may not share finances equally, but Centrelink/DVA will assess your obligations as if you do.
Some couples may be willing to share a life but prefer to keep finances separate, so inheritances can pass to their own children and family. If you and your partner enter the relationship with differing levels of savings and assets, as a couple you will need to decide how to split or share resources. You may also need to decide whose home to live in or whether to buy a new home.
Balancing personal goals as a couple with estate planning becomes crucial. Things you may wish to consider include how to ensure your partner is looked after if something happens to you, while also wanting to safeguard inheritances for your own children. This can present a delicate balancing act. Compounding this challenge is the regulatory framework of Centrelink and aged care assessments, which regard cohabiting couples as financial units irrespective of individual ownership or financial preferences.
From a Centrelink and aged care view, two people living together in a relationship are assessed as a couple. Assets and income are combined and then split equally – regardless of who owns what or how you want to divide your finances.
WHAT DEFINES A COUPLE
Whether two people are considered to be a couple depends on five aspects, including:
Financial aspects.
Nature of the household and how household chores are shared.
Social aspects and how the two people present to family and friends.
Any sexual relationship.
Commitment to a permanent and ongoing relationship on an intimate level.
No single factor is definitive in determining status as a couple. An assessor may look at the facts of the case and interview the people involved as well as friends and family to determine whether the two people live separate or shared lives.
NOTE. If you receive a Centrelink/ Veterans’ Affairs (DVA) benefit and your relationship status changes, you need to notify Centrelink/DVA and update your records.
THE IMPACT ON AGED CARE
The implications of relationship status extends beyond domestic arrangements into the realm of aged care financing.
Regardless if you are self–funded retirees or recipients of a Centrelink/ Veterans’ Affairs (DVA) benefit, your combined assets and income as a couple form the basis for aged care fee assessments. Potentially this could lead to financial stress for one spouse necessitating assistance from the other. Strategic financial planning becomes imperative to mitigate such challenges, ensuring equitable outcomes for both parties.
For example, a spouse staying at home may use some of their assets to pay the accommodation costs as a lump sum (Refundable Accommodation Deposit) for their spouse moving into residential care. When the spouse in care dies, this money will eventually be returned to the estate of the spouse who was in care, rather than the spouse who made the payment. This means the money may find its way into the other family’s hands, which may not have been the intention.
Navigating the complexities of aged care financing and estate planning in the context of second marriages demands tailored guidance, to help navigate the rules and consider strategies that are as fair as possible to both members of the couple. This may also help to minimise family conflicts at a later date.
If you want to talk through your options, call our office on 02 4325 0884 to arrange an appointment.
Morgans Financial Limited
1/6 Burns Cres, Gosford
Sophie Doyle (AR#000470612) is a Retirement and Aged Care Specialist at Morgans Financial Limited (Morgans AFSL 235410 / ABN49 010 669 726); with a passion for assisting people make informed financial decisions, as they navigate their way through retirement and aged care.
Disclaimer: While every care has been taken, Morgans Financial Limited makes no representations as to the accuracy or completeness of the contents. The information is of a general nature only and has been prepared without consideration of your individual objectives, financial situation or needs. Before making any decisions, you should consider the appropriateness for your personal investment objectives, financial situation or individual needs. We recommend you see a financial adviser, registered tax agent or legal adviser before making any decisions based on this information. Current at 19 February 2023.
