Case study

Bill Smith is a 74 year old widower. He has three children - two sons and a daughter.

He lives in Brisbane.

You have been his financial adviser for many years. His allocated pension has just run out of money. He has $30,000 in a cash management trust and owns $50,000 of shares.

He receives the full Centrelink aged pension.

He lives in a house worth $700,000.

He needs a new car and also has a few outstanding debts. After speaking to his children he decides to take out a Reverse Mortgage and takes out $30,000 immediately to buy the new car. He also uses the remaining money to receive $614 per month over the next 15 years to improve his lifestyle. This still leaves him a $70,000 flexible draw facility available for additional drawdowns as and when he needs them.

By doing this he ensures that his full Centrelink entitlements are not jeopardised.

Bill decided to borrow the funds himself because he preferred the independence and lower complexity. He did not want to come to an arrangement with one of his 3 children (he did not want any problems settling his estate when he died).

He sought independent legal advice and spoke to his three children privately and together before entering into the Reverse Mortgage product and they all supported his decision.

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