What is the best way to spend an inheritance to save your Age Pension?
Cheryl is due to come into an inheritance and is wondering if she should use it to buy a new home and therefore have more asset value excluded from the asset test.
I was wondering if you know whether the Government is going to include a pensioner’s home as an asset from 1 January 2017, and if so, which value will they be starting at?
I am on a part Age Pension and am due to get an inheritance soon, which is large enough that I think it could possibly cause me to lose my Age Pension. If the family home is to remain excluded from the asset test, is it acceptable that I could sell my present home and use the profits and my inheritance to upgrade to a more expensive home, which would enable me to continue receiving my part Age Pension?
A. Your home, if it is your principal residence, will remain excluded from the asset test after the thresholds change on 1 January 2017.
We can’t actually advise what you should do with your inheritance, however, as a general rule, an inheritance will not be considered as an asset. Should you use the money to purchase a financial asset, such as shares, investments or interest-bearing account, then the deemed income will be assessed.
The family home, regardless of its value, will be excluded from the asset test. If you were to sell your home with the intention of purchasing another, the proceeds would be an exempt asset for a period of 12 months, however, would be assessed using deeming under the income test.
While buying a more expensive home may well mean you can maintain your part Age Pension, there may be other related costs, such as stamp duty and increased running costs, which could negate any benefit you receive from your Age Pension.
You may find YourLifeChoices’ Should you downsize? guide a useful reference for costs and requirements involved.
From the information you have given, it seems that your inheritance may be a considerable amount of money. You may wish to consult with an independent financial advisor for the best way to structure your finances to maximise your income.
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