Can you avoid gifting rules by making will bequeaths?

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Circumstances can change considerably when your partner dies. You may find yourself exceeding the Age Pension asset threshold, but does gifting apply if you bequeath in a will?

Q. Alison

My husband and I are homeowners awarded part Age Pensions on the basis of valued our joint assets. I understand that we will still be eligible for reduced part Age Pensions once the asset thresholds change, but believe that when one of us dies the survivor will no longer be entitled to an Age Pension unless the assets are below $541,200.  

What is the situation if the assets are reduced by gifts to our three children as beneficiaries of the will of the deceased spouse?

I’m not sure how gifts through a will relate to the rules governing other gifts. I imagine quite a lot of pensioner couples will be in a similar situation and would welcome clarification.

A. Provided by Centrelink

When a member of a couple dies, the surviving partner inherits assets that were held jointly. Assets held as tenants in common are distributed under the conditions of the deceased person’s will.

However, the gifting provisions would apply to the remaining member of the couple if assets held as joint tenants were given away to another person, whether that person is part of the family or not. Therefore you should also consider carefully the implications of passing on assets to children or other family members and friends and bypassing yourself, as this can affect your asset position and may result in changed payment rates.

You must advise Centrelink of any changes to your income and assets, as such changes may have an impact any payment you receive or for which you become eligible. 

If you have further questions, we encourage you to contact a Centrelink Financial Information Services (FIS) Officer to discuss your individual circumstances. FIS is a free and independent service and the FIS Officer will be able to help you explore your options. You can contact Centrelink’s Financial Information Service on 132 300.

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Written by Debbie McTaggart


Total Comments: 5
  1. 0

    Although Centrelink’s answer is a little confusing to me here let me put a hypothetical situation. A pension age couple who are both in their second marriage (ie their first partner predeceased them). They each bought to the second marriage assets which are not, in the usual sense, joints assets, by this I mean assets which had not been accumulated together. If one partner dies it would be usual for these ‘non-joint’ assets be bequeathed to the children of the deceased partners first marriage.
    Does this answer above mean that Centrelink will assess all the couples assets as joint assets, irrespective of where they came from, and invoke the gifting rules?

  2. 0

    Here’s a good one. According to Centrelink an inheritance is not counted as an asset. I thought I would test this out as I had inherited some money a year or two beforehand. That’s right, said the woman from Centrelink. So I said I have been over assessed for the last couple of years, I said. What did you do with the money, she asks. I put it in The bank, I said. Well, it’s now an asset and assessable. Ok, I said what about if I take the money out of the bank and put it under the bed. Well, it would still be an asset and assessable. What about if I give it away to charity, I ask. Well, that would be gifting and you would still be assessed on the money you gave away. But, you said an inheritance is not assessable, I said. Yes, that’s right. And so we went around and around and around. To all governments, get your act together because none of you can organise a piss up in a pub. No wonder Trump won the election. I see more and more disenchanted people in this country and I think it won’t be too long before we go down the same route.

    • 0

      Inheritance is not assessable as an Asset for first twelve months (12) of receipt however, it is subject to Deeming Income Rule from the moment you report it. You have to report it within 14 days of receipt. So, it doesn’t matter whether you stick it under the mattress or in the bank, you are up for Deeming Income Ruling. After 12 months it is counted as an Asset together with all other assets you own. It does not matter if it earns 10% pa or 2% , you get assessed by the % of the Deeming Income Rule. So the interest earned does not have to be declared as Income, it’s already deemed. You could blow it in first 12 months and report every time your circumstances change by $2,000.00 Some of it you can gift, I think, $10,000 per year for up to 5 years (?). If you don’t own a home and if the inheritance is ample enough including legal costs and stamp duty, then buy a house or a unit for your sole residency. Another one is, Funeral Bond up to , I think, $12,000 which is not treated as asset. Other than those options you have to face the fact that it will impact on your fortnightly pension payment. On the brighter side, once you get below the thresholds you will be back to full fortnightly pension payments…providing the government doesn’t change the rules coming in on 1st January 2017. Wonder how long that will last until they change it again? So next time you vote, select the Pensioner’s Party. Pensioners represent 20% of the voters in Australia.

  3. 0

    There can be some things that chnage what you expect. For example if the existing will was made before marriage then it is null & void. If the deceased is intestate then then estate goes entirely to the surviving spouse. These are things that might alter a persons understanding of where they’re at.

  4. 0

    Yes i feel its quiet unfair, cause the rich get richer and the poor get poorer, and they keep changing the rules as they go along to suit themselves.
    And they wonder why the ppl are disgruntled!!
    Boy the times they are a changing.
    I wish they would stop changing the rules as it suits them. Stick to what needs to be done.
    and with a bit of luck we won’t go down the tubers!



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