Legal Tip 262: Wills and inheritances Effecting Pensions

When making a will the testator should consider the potential effects on the pension of recipients.

Mum and Dad might qualify for the pension because they meet the assets test by just falling under the limit for receiving the full pension – which is currently $394,500 for a couple (as of 1 July 2019).

Say they have $390,000 in the bank between them.

Mum dies.

Dad now has exactly the same assets as he had before mum’s death (except for the funeral costs perhaps). He has the main residence and $390,000 in the bank still.

But the assets test for a single pensioner is $263,500 or less to get the full pension.

This means that Dad will have his pension reduced.

Also dad’s expenses as a single guy would be very similar to that of mum and dad combined. Just a little less for food perhaps, but he will still have the car rego, rates, similar electricity costs.

So it is a double whammy. The pension reduces and the living costs are almost the same.

In this situation the pension might drop from:

· $1407 per fortnight when mum was alive to

· $553 per fortnight after mum is gone.

(used this useful calculator Age Pension Calculator | Noel Whittaker)


A way around it?

Carefully plan when doing the wills – which might be hard to do well in advance but you need flexibility.

A portion of the assets could be left to a child – who might be the one to either refuse some or all of the gift so that the surviving parent gets the rest up to an amount which doesn’t affect the pension. The child might also look after their surviving parent (they might not too!!!)

Unfortunately rejecting a gift from a deceased estate will not work to increase the pension because this is treated as if the rejection was a gift. The deeming rules will mean the person rejecting will be assessed on what they missed out on for 5 years.