If you’re about to receive an inheritance from an estate and you’re on an age pension, your life and your finances may be about to change.
The Age Pension
Eligibility for a pension and the amount of that pension is measured against your assets and your income. The test that results in the lower pension (or even no pension) will be the one that will be applied by Centrelink.
Inheritance
An inheritance can affect your entitlement to a pension. The value and nature of the inheritance is the key. Limits have been set for income and assets. If you exceed those limits, then you will not be entitled to a pension or only entitled to a part pension.
The law requires you to notify Centrelink of any changes to your financial situation within 14 days of the change. As it can take some time to finalise an estate, your receipt of the inheritance may be delayed.
Generally, you do not need to notify Centrelink about your inheritance until you receive it. As well, it is generally accepted by Centrelink that, on average, you will probably not be able to receive your inheritance for up to 12 months after the person’s death.
The 14-day period commences running upon receipt of your inheritance. If there is a delay in, you are receiving your inheritance longer than say 12 months you may need to explain the delay to Centrelink
What not to do when you receive an inheritance
None of the following tactics will work in preserving your pension entitlement.:
Ignore it
- Some people simply don’t do anything about administering the estate and distributing it;
- The administration of an Estate must be completed as soon as reasonably possible, especially when a Grant of Probate or Letters of Administration are involved as the Executor or Administrator as the case may be has a duty to the Court to administer the estate in a timely manner;
- The duty is on the recipient of the pension to notify Centrelink of any change or potential change in the person’s assets or income.
Delaying
- Delaying the inevitable does not work, for the reasons set out above.
- Also, Centrelink is aware of this strategy.
Make a Gift
- Giving away your inheritance doesn’t work because of what is known as the Centrelink deprivation rules;
- It means that, while you may give it away, Centrelink says you have still got it and it will still be part of your assessable assets for at least 5 years.
- You are only entitled to give away $10,000.00 per year up to a maximum of $30,000.00 in the first 5 years
Refusal to accept it
- Refusing to accept the gift does not help you either as it is the same as making a gift of it.
The purpose of the pension is to support those who do not have sufficient resources to support themselves. If you receive an inheritance which will support you, then, the need for the pension evaporates.
This article is for general information only and is not intended as legal advice. If you need specific help contact our office.
