What happens to property under a Financial Management Order?
Written by Angela Teng
Quite often, family members of our customers have asked us, “as my parent’s financial manager, why are you selling our family home?”
A person may need a financial manager when they are not capable of managing their own money. NSW Trustee and Guardian can be appointed someone’s financial manager as a last resort.
When acting as a financial manager, we consult with the customer and/or their family or support network to develop a budget. We base the budget on the overall financial position of the customer. Significant decisions such as selling and buying property are made in writing and go through a rigorous review process to ensure accountability, transparency, and fairness. If the customer or their family do not agree with a significant decision we make, the legislation ensures there is the opportunity for an independent review, both internally and externally, through the Supreme Court of NSW and the NSW Civil & Administrative Tribunal (NCAT).
How assessments are made
Decisions about property are not made lightly. We understand it can be emotional for the customer and their family due to the financial and sentimental value of the assets involved.
We always aim to make decisions according to our customers’ will, choices and preferences. If a customer has been living in a property and would like to continue to do so, we will support them with their choice unless:
- their income from pensions or assets no longer cover their expenses
- there is a need for them to be better supported by moving into a group home or aged care facility.
If this is the case, we will identify the impact and risks associated with all available options and present a decision to the person, and the important people in their life, to sell or retain the property.
“Occasionally, our decision will be at odds with the views of the customer or their family,” says Ms. Deb Simpson, Director of Estate Management at NSW Trustee and Guardian, “but our primary responsibility is to the person we represent. Our professional obligation is always to advise our customer of the best financial outcome for them.”
During 2019-20, we purchased 28 properties, sold 612 properties, and are managing a further 2,931 retained properties on behalf of our customers.
Decisions to retain
In some cases, our financial assessment may suggest that a property should be retained if the customer’s income can cover all their expenses, including ongoing property costs, and outweighs any associated risks. In other cases, our suggestion may be to sell a property but the customer or their family may disagree and propose an alternative solution.
To make a decision to retain a property, as financial manager we must ensure that all debts and any ongoing shortfalls of the customer’s living expenses are duly paid. Family member(s) can propose to cover these liabilities, or the property can be leased, as an alternative to selling the property.
“We have worked with many customers and their families who are happy to contribute to the ongoing expenses to maintain the property because it is what mum or dad would have wanted, or it means they are able stay in the home or keep the property in the family.” says Ms Simpson.
“It is important to note, however, that this arrangement needs to be reviewed regularly.” she adds, “we need to consider fluctuations to income such as pension payment eligibility and market volatility of investments.”
Definitions
- assets
All of a person’s property including real and personal e.g. bank accounts, realty, shares in companies, cash etc.
- independent
Free from outside influence or control.
- income
Earnings generated over time.
- Tribunal
A legal forum to make and review decisions and settle conflicts. Tribunals are like courts but are usually more specialised and less formal.
Case Study one*
NSW Trustee and Guardian is Bob’s financial manager. When Bob was no longer able to look after himself in his own home, the decision was made for Bob to move into aged care, where he could access 24-hour assistance.
Bob’s only child Joe resides in Bob’s home. Joe requested NSW Trustee and Guardian to review the decision to sell Bob’s home to pay for the aged care expenses, as he wanted to retain the home he grew up in and will eventually inherit the property.
Joe was informed that Bob has $20,000 in debts and require approximately $700 per week in living expenses. Joe agrees to cover these costs and continues living in Bob’s home. Bob’s living expenses are reviewed annually to ensure his required expenses are met.
Decisions to sell
When all possible options to retain a property have been considered and exhausted, the property will need to be sold.
Some situations will be straightforward. For example, most people need to consider the transition to aged care when they reach a certain age. It is not unusual for people without a financial manager to decide to sell their family home when they do not have excess funds or the energy to maintain the property.
For some customers, moving out of their home will make it assessable under the Centrelink income and assets test. This means that the sale of the property can maintain their Centrelink payments and increase the savings in their trust account.
For others, the projected rental income may not cover the expenses, or the risk of maintaining the property and tenancy may be high and too costly.
There may also be significant conflict between family members. Disagreements between siblings over their elderly parent’s finances or separated parents fighting over decisions for their adult child living with a disability are common scenarios. In these cases, we are obliged to make the decision for the best outcome of the customer and act impartially.
Crucially, selling the property and moving the customer into a community home, group accommodation or aged care facility can be a way to prevent financial and other forms of abuse by people close to them.
Definitions
- trust account
A type of account where a person or organisation (the trustee) holds money on behalf of someone.
- assets
All of a person’s property including real and personal e.g. bank accounts, realty, shares in companies, cash etc.
- income
Earnings generated over time.
Case Study two*
NSW Trustee and Guardian was appointed Linda’s financial manager after significant conflicts between her sons, Luke and Jason. At the time, Luke was living in his mother’s home rent-free and providing care for her.
Jason applied to the court for the financial management order after finding out that Luke has been neglecting Linda and accessing her pension income and savings for personal use.
NSW Trustee and Guardian provides a financial assessment for Linda and presents the decision that her property should be sold to help fund her transition into aged care. Jason is supportive of this, while Luke is not. Linda is pressured into agreeing with Luke after he sends a series of abusive and threatening messages to his mother, brother and NSW Trustee and Guardian staff members.
A series of reviews are conducted including an independent review by NCAT finding that the sale of the property was in fact the best decision for Linda. The decision is implemented despite Luke’s objections and Linda is supported to move into an aged care home of her choice.
Definitions
- independent
Free from outside influence or control.
- financial management order
A legal decision made by a court or tribunal appointing a person or organisation to make legal and financial decisions on behalf of someone who is not able to make such decisions for themselves.
- income
Earnings generated over time.
Getting to the heart of it
Most people don’t choose or expect NSW Trustee and Guardian to be in their lives and we understand that it can sometimes be an emotional process. But our purpose is always to protect the person we represent. We make decisions for them according to the principles in section 39 of the NSW Trustee and Guardian Act 2009, which stipulate how we must act.
Financial management is more than just buying and selling property. A financial manager must deal with every aspect of the managed person’s finances like identifying debts, handling insurance policies, investing funds, managing taxes, paying for accommodation, buying or selling large value assets and managing legal issues.
“It is a role that is best suited to someone you know and who is capable and trustworthy,” Ms Simpson says, “and while we will always be here for the people that need us, we want to encourage everyone to plan ahead and appoint the enduring Power(s) of Attorney they want before they lose the capacity to choose for themselves.”
* Names and identifying details have been changed to protect the privacy of individuals.
Definitions
- assets
All of a person’s property including real and personal e.g. bank accounts, realty, shares in companies, cash etc.