Home truths

Q: My parents will soon sell their home and buy on the Gold Coast with us. We're looking at houses up to $500,000. They'll contribute up to $280,000 and my husband and I will take out
a loan for the rest. How does this impact on their pension, and how should the ownership documents be drawn up so my two brothers get a settlement for my parents' investment when they die?

Barbara, via email

Barbara, you're doing exactly the right thing in making sure this
is done properly. The last thing you want is a rift in the family.
Now, you need to get professional advice to cover all the issues in this sort of situation, but here are a few points to keep in mind:

Assets testing
As far as your parents' aged pension is concerned, a pensioner's principal place of residence is exempt from the assets test, so their payments won't be affected.

Ownership issues
Make sure the ownership details of the new house are very clear. How to own the property is an interesting decision. The choices are 'tenancy in common' or 'joint tenancy'.

Tenancy in common assigns each of the partners direct ownership of a nominated portion of the property. It means each party is responsible for their own mortgage and share of the property. A joint tenancy agreement means each partner is jointly and severably responsible for the entire property and the mortgage.

The first option would mean that your parents have a distinguishable separate title to their part of the house and won't be at risk of being lumped with your mortgage if you and your husband get into trouble.

Your brothers should be happy as there's a distinguishable part of the house which can form part of your parents' estate to be distributed to beneficiaries as they wish.

Final settlement

Another point is how your parents' portion of the house will be distributed after their death if you can't afford to buy it out but want to stay there.

Get a solicitor to draw up a simple agreement which says either of you have the option to buy the other out at a price determined by the average of three independent valuations.

Otherwise the property is sold and proceeds distributed according to the ownership proportion.