How does an inheritance affect my Pension?

I receive a pension from Centrelink and I am also about to receive a gift under a Will, what do I need to know?

The answer to this question will depend on the type of pension you receive and whether it is a full pension or a part pension. It will also depend on:

(a) Whether you are a homeowner or not;
(b) Part of a couple;
(c) Part of a couple but separated due to illness;
(d) Part of a couple where one partner is eligible to receive a pension; and
(e) Your existing wealth.
What do the above circumstances have to do with anything?

Well, your answers to the above questions will determine what Centrelink will consider to be your personal asset limit. If the inheritance you receive when added to your already assessable assets will not exceed your personal asset limit, then your pension won’t be impacted. However, if it does then it likely will be.

What if I’m not inheriting directly, but I’m the beneficiary of a testamentary trust that is inheriting?

According to the materials released by Services Australia and the Social Security Act 1991 (Cth), the assets of the trust will be 100% attributable to you.  Therefore it will be incumbent upon you to seek a decision from Services Australia that a lesser percentage be attributable to you even though you may only be one of a number of eligible beneficiaries.

Can I waive my interest in my inheritance?

Centrelink may potentially view this as a gift and as such will apply its gifting limits, which currently are:

(a) $10,000 in one financial year; and
(b) $30,000 over 5 financial years – noting that this can’t include more than $10,000 in a single financial year.

If you make any gifts over the above limits Centrelink will count the excess in your assets test and also include it in your income test.

Can I just ask the Estate to not distribute my gift to me?

Keeping your inheritance in the Estate will not prevent it from being assessable by Centrelink.  Usually once all the assets of the deceased have been realised and the Estate’s liabilities have been paid, the Estate will be considered to be in a position to proceed with making the distributions in accordance with the deceased’s last Will or your relevant State’s rules of intestacy. Any attempts to delay the due administration of the Estate will not be looked on kindly by Centrelink. In these circumstances, Centrelink will likely look to assess your entitlement as an asset, even before you receive it.

What can I do if my inheritance is going to impact my pension?

Seeking advice from a financial planner is your best port of call, to assist you with considering your options and the implications of your inheritance on your pension.

What can I do if I’m leaving a gift for someone under my Will and they’re in receipt of a pension?

There are estate planning strategies that can help mitigate the impact any gift you intend to leave under your Will upon your beneficiaries who are in receipt or will potentially be in receipt of a pension at the time of your death. Southern Waters Legal are experts and have a proven track record in assisting clients with issues such as this.

If you would like further information or specific advice in relation your Estate Plan, please do not hesitate to contact our team (02) 9523 5535.

Disclaimer: The information contained in this article is provided as general information only. It is not intended to be legal advice and it should not be used or relied on as legal or professional advice.