Finances in retirement can be confusing so we’ve turned to finance expert Noel Whittaker to answer your questions. This week he deals with inheritance and gifting rules.
Spending an inheritance
I am due to come into a considerably large inheritance, approximately $300,000. While this is indeed welcome, I’m worried about the effect it will have on my Age Pension once the asset thresholds change in January. I’m considering buying a more expensive house so that it doesn’t count as an asset – but is this the best thing to do?
Answer. The costs of selling and buying a new home will be more than $50,000 – this would be far more than any money you could gain by getting an increased pension. You could reduce your assets by gifting $10,000, and by placing $12,500 in a funeral bond, but just keep in mind that every hundred thousand dollars you dispose of increases your pension by just $150 a week. Therefore it takes 13 years to get back the money you spend or give away. I suggest you just live normally, and enjoy the fact that as your assets reduce due to normal spending your Age Pension should increase.
When do gifting rules start?
I understand that Centrelink has certain rules around gifting but I was wondering, if I give away some of my savings to my family before I apply for the Age Pension, would Centrelink regard this as a deprived asset? I would like to reduce my assets as the new thresholds that apply from 1 January 2017 mean I will receive less Age Pension.
Answer. Any money given away in excess of the limits ($10,000 a year with a maximum of $30,000 over five years) is treated as a deprived asset and will be subject to deeming for the next five years. This includes any money gifted in the five-years prior to your Age Pension claim.
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