The receipt of inheritance brings both financial and emotional considerations.  Financially, an inheritance will more often than not improve one’s financial position by allowing debt to be paid down or the wealth base to increase.  Emotionally, the loss of a loved one is never easy, or the responsibility of applying the inheritance to ensure a ‘legacy’ is left may become a real burden.

For Age Pension recipients, there are additional considerations.

Centrelink assessment of an interest in a deceased estate

An individual’s interest in a deceased estate is an assessable asset once it is received or can be received.

It can take considerable time to finalise an estate, it is accepted that a beneficiary is unable to receive their interest in a deceased estate for up to 12 months from the death of the testator.  However, if the estate is finalised earlier the interest will be assessed from the date it is received or able to be received.

If after 12 months of the death of the testator the estate has not been distributed, Centrelink may consider the facts of the case to determine what is preventing the estate from being finalised.  If a beneficiary has contributed to the delay, their interest will be regarded as being available.

If the beneficiary is not the executor and the executor has discretionary power on how the estate is distributed, Centrelink will accept that the beneficiary has no control over the delay.  Also, Centrelink will accept that where the estate debts are yet to be paid the estate interest cannot be received.

Deprivation provisions are intended to limit the potential for recipients to avoid the assets and income tests. They apply to a person’s interest in a deceased estate or superannuation fund if the person:

• Waives their right to their interest in the deceased estate or superannuation fund and the person obtains no, or inadequate consideration.
• Directs the executor of the estate or trustee of the superannuation fund to distribute their interest in the deceased estate or superannuation fund to a third party and the person obtains no consideration or inadequate consideration.
• Gives their interest in the deceased estate to a third party after the estate has been finalised for no or inadequate consideration, or
• Gifts their interest in a superannuation fund.

Once a person’s interest in a deceased estate is assessed, the value of this asset or the deemed income may reduce that person’s age pension entitlement, possibly to zero.

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

Regardless of the short-term issues on the resurgence of COVID-19 driven by the Delta variant, lockdowns and restrictions, fully utilised monetary and fiscal policies alongside high inflation, the Australian and Global markets are at all-time highs. The current investment climate overloads investors with an excessive amount of information on traditional assets such as shares and property alongside speculative favourites such as GameStop and Bitcoins. It is easy to lose sight of the fundamentals of investing and below are quotes from the great investors of our generation to keep us in check.

“Never invest in a business you can’t understand.” – Warren Buffett

Many lost a fortune through the Global Financial Crisis (GFC) in investments that were not easy to understand and involved excessive complexity. While there’s likely something in blockchain and digital finance, the same caution applies to cryptocurrencies.

“More money has been lost trying to anticipate and protect from corrections than actually in them.” – Peter Lynch

Preserving capital is important. However, timing the market during and after a correction leads to investor’s becoming so focused on avoiding losses that they miss the initial positive market recovery. We have seen a bit of that ever since share markets bottomed in March 2020, with numerous forecasts for steep falls ever since and yet markets have fallen a few per cent every so often only to resume their rising trend.

“To be an investor you must be a believer in a better tomorrow.” – Benjamin Graham

If you don’t believe the bank will look after your term deposits, that most borrowers will pay back their debts, that most companies will see rising profits over time as the economy grows, that properties will earn rents, etc (and that the world will learn to shake off or live relatively safely with coronavirus) then there is no point investing. This is flippant but true – to be a successful investor you need a favourable view of the future.

“There is no free lunch.” – Anon

If an investment looks too good to be true, it probably is. Focus on investments offering sustainable cash flows (dividends, rents, interest) that don’t rely on excessive gearing or financial engineering.

If you are ever in doubt in the face of volatile market conditions, please contact one of our friendly financial advisers.

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.

Financial advice is important at all stages of your life.  Whilst each generation has many differences, ultimately our financial goals will end the same, it’s just the timing of the priority.

When clients see a financial adviser and are asked why they are seeking financial advice, many new clients will focus on generating wealth or planning for retirement.  It’s key for the adviser to explore the client’s financial goals.  Only then can a plan be considered on how to achieve the client’s endpoint.  It’s worth understanding that we are all different, there is no right or wrong answer, and the priorities of our goals will vary over our lifetime.

The Financial Planning Association of Australia prepared a document in 2016 entitled “Dare to Dream” and a part of the survey considered achievements and goals across generations.  Notwithstanding the impacts of Covid-19 on travel and people’s work and health, much of the detail from 2016 remains apt today.

The report highlighted that whilst one in two Australians dreamt more about the future in 2016 compared to 2011, 63% had made “no plans” or “very loose plans” to practically achieve those dreams.

The survey considered the three main generations present in the workforce – Baby Boomers, Gen X and Gen Y.

Amazingly, when it came to identifying their “greatest achievement”, the top two answers provided for every generation were overseas travel and buying their first home.  Gen Y also listed a new home as their top dream, reflecting that many had yet to achieve this, but when they did it was seen as a significant achievement.  Gen X still had a first home as their number 4 dream, whereas Boomers had moved to see new furniture for their home (already in ownership) as a higher dream.

All generations would love to travel as a short and long term goal, but only Gen X / Y credited living overseas for a period as a significant achievement, reflecting the change in dynamic and the opening of world travel and opportunities through the past 20 to 30 years.  Travel is not always the highest of priorities for many clients but does feature highly in goals requiring a lump sum allocation and perhaps the need for household budgeting to accomplish.

The goal of long term planning for retirement was common across all generations and early retirement could be seen as a focus area for both Gen X and the Boomers.  Not surprisingly, all generations saw saving money, repaying debt and buying a new car as high priority short term goals.  Saving money and repaying debt are great short term goals when targeting retirement wealth and early retirement.

Ultimately, the report highlighted that the goals for all 3 generations are largely the same, it’s just the priority we allocate to them at each stage of our life that is different.  When considering your goals, make sure you target what is both important and realistic for you – your financial adviser is there to help you on your way.

Source: FPA, “Dare to Dream”, 2016.

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.