Receiving an inheritance can bring mixed emotions. While it may improve your financial position, it often comes at a difficult time after losing someone close to you.
If you receive a Centrelink or Department of Veterans’ Affairs (DVA) payment, there is another consideration. An inheritance may affect your entitlements.
Understanding the rules around inheritance and Age Pension payments can help you prepare for changes to your financial position.
When does Centrelink assess an inheritance?
Centrelink or DVA will not necessarily count an inheritance as soon as someone names you as a beneficiary in their Will.
Finalising a deceased estate can take time. The executor may need to pay outstanding debts, sell assets, finalise tax matters or resolve disputes before distributing the inheritance.
Generally, Centrelink or DVA will consider the inheritance once the executor can pay or transfer it to you. If you receive a means-tested payment, you will then need to advise them about the change in your financial circumstances.
How can an inheritance affect your Age Pension?
The impact on your entitlements will depend on what you inherit and what you decide to do with it.
For example, an inheritance could include:
- Cash or money held in a bank account
- Shares or other investments
- Property
- Personal assets
- An interest in a trust or other financial arrangement
Centrelink and DVA may treat different assets differently under the income and assets tests.
As a result, an inheritance will not affect everyone in the same way. Your existing assets, income and circumstances will help determine the impact. Your pension may stay the same, reduce or potentially cease.
An inheritance can affect more than your pension
For older Australians, the financial impact may extend beyond Centrelink or DVA payments.
If you receive aged care services, changes to your income or assets may also affect the fees you pay.
For this reason, it can be useful to consider an inheritance as part of your overall financial position. The amount you receive is only one part of the picture.
What should you do if you receive an inheritance?
Before making major decisions about inherited money or assets, consider the possible financial impact. Your decisions may affect Centrelink or DVA entitlements, aged care fees and your longer-term financial needs.
Even a simple decision can have consequences that are not immediately obvious. For example, you may want to give money to family, invest it or change how you hold your assets.
Getting advice before making these decisions can help you understand the potential consequences and consider your options.
Need help with an inheritance and Age Pension entitlements?
Have you received an inheritance and are unsure how it could affect your financial position? We can help you understand the rules and consider your options.
This may include the impact on your Age Pension, DVA entitlements, aged care fees and other financial arrangements.
Contact Forman Financial Services today or book a meeting to discuss your circumstances here.
Disclaimer and Warning
The information above is of a general nature only. It should not be used as a source to make financial decisions. It’s also important to note that the legislation and figures related to this topic tend to change regularly and therefore the information above may not reflect the current status. We recommend that if you are looking for advice on this matter, you should contact us.