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.