What is the best way to deal with an inheritance?

Owen has a number of questions relating to a recent inheritance.

What is the best way to deal with an inheritance?

Owen has a number of questions relating to a recent inheritance.

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Q. Owen
I am 67 and my wife is 64. I am on a part pension of around $350 a fortnight. I am assessed for the pension based on a combined income of around $40,000. I have an income stream of $14,400p.a., based on $150,000 in super (which as far as I know is assessed as income as well as deemed income from the asset) and I also have $3000 in super. I have accumulated about $6500 in work bonus credits.

I recently received an inheritance of $30,000. We have a small farm and conduct some cattle trading which operates consistently at a loss (we meet Centrelink’s requirements for property over five hectares). I have shares, which Centrelink assesses as $10,000. My wife has about $150,000 in savings accounts and $250,000 in super.

My wife has been on income protection (now expired) and is now taking long service leave which ends in November, at which time she will be retiring from work altogether. She is currently earning about $450 a week. She is currently applying for disability, which is still being processed.

My questions are:

  1. Will the $30,000 inheritance affect my pension?
  2. Will the deemed income from the $30,000 be covered by my work bonus?
  3. Would it be better to deposit the $30,000 into my wife’s super?
  4. Would I be better off transferring the $150,000, generating the income stream, from my superannuation to her super as well?
  5. Can my wife withdraw amounts from her super as she will not have any income after November, or does she have to wait until she is 65 to do so?

A. The inheritance itself will not affect your pension, but what you do with that money will have an impact. If you place it in the bank, it will be treated as an asset and also have deeming applied to be considered as income. If you purchase an asset it will also be included in the assets test. If, however, you spend it on home repairs (assuming that you own your own home) or on a holiday, then it will not affect your pension.

The inheritance is not covered by the work bonus. The work bonus only covers income from paid active employment.

If your wife is yet to reach retirement age, any money in her superannuation account will not be included in the Age Pension means tests.

Transferring assets out of your superannuation fund to your wife is a legitimate strategy to reduce the impact of the pension means test, but there is a non-concessional contribution cap of $100,000 per year.

If your wife has reached preservation age she can begin a transition to retirement strategy that will enable her to convert a portion of her superannuation balance into regular income payments. If she does this, however, her superannuation balance will be included in your pension means tests, which means you may receive less pension in the process.

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    Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice. from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.





    COMMENTS

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    ray from Bondi
    8th Nov 2019
    10:54am
    this did not answer the question was would it affected the pension, I read how money could be moved around to reduce the impact, but as I am sure others would like to know what is the short answer :)
    Skiing
    8th Nov 2019
    11:34am
    Should be easy enough to work out. Already on a reduced pension so if $30k goes into the bank, deemed income increases so pension drops. With $30k the deemed amount is minimal so only a small drop in pension. If money moved to wife’s super then financial assets reduce so an increase in pension. Have to weigh up the increase in pension with the 15% tax on earnings in super in accumulation in wife’s name. Should discuss in more detail with a Centrelink FIS
    Farside
    8th Nov 2019
    4:02pm
    answer to the question depends upon the choices Owen makes
    Spud
    8th Nov 2019
    11:05am
    I found it smart to use the Centrelink financial officer in my case . I was willed the family home in Ireland but my brother was left a life interest in the home , he is an Aspergers suffer. The dept went against the recommendations of the financial office and included the home as an asset and also income bearing despite my brother assuming all running costs of the house . I objected to the outcome and 9 months later the decision was reversed in my favour! The financial officer did a great job on my behalf and it came down to the person who made the original decision didn’t turn to the second page of my father’s will to see the conditions set out .
    MICK
    8th Nov 2019
    1:27pm
    Owen sounds like he is doing nicely irrespective of the part pension. Many self funded retirees likely do much worse and get zero pension.
    Mariner
    8th Nov 2019
    3:29pm
    In Owen's place I would see if the gifting rules would apply ($30'000 in five years) and hand it straight to my kids to help with the mortgage. Owen says he is doing nicely right now and does not really need it.
    Farside
    8th Nov 2019
    4:05pm
    gifting provision is a max of $10,000 in a single year, $30,000 over five years
    Mac
    8th Nov 2019
    1:47pm
    Spud, interesting story regarding your father's will not being read completely. It makes you wonder how many similar events occur where the all the paperwork and facts are not taken into consideration.
    Spud
    8th Nov 2019
    4:38pm
    Yes and I had accepted that Centrelink knew more about the rules than I did. It was on another matter that the financial officer queried me on the outcome . I then requested a review . I must say the officer was very very surprised at the first outcome ! People should know that you actually have to utter the words “ I request a review “ either in person or in writing .
    McDaddy
    8th Nov 2019
    8:51pm
    Put it in your wife's super and it won't be counted as an asset for a couple more years until she is Pension age.


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