Abandon gift in Will to keep pension?

The Financial Planner carefully structures Mary’s affairs.

Mary receives a $1 pension and Concession Card. But then, Mary’s mother dies.

Mum’s Will leaves everything to Mary. The inheritance costs Mary her $1 pension and Concession Card. Mary has money from her superannuation. She doesn’t want the inheritance. Mary desperately renounces the gifts under the Will. Mary’s children get the inheritance instead.

Does Mary keep her Centrelink Benefits?

Sadly, no. Centrelink deems monies abandoned or given away still yours for the next five years.

The two exceptions:

1. $10,000 rule – gifts under $10,000 per year are not means tested
2. $30,000 rule – gifts under $30,000 over a five-year period are within the gifting free area. However, a gift cannot exceed $10,000 in any year.

Gifts above $10,000 are ‘deprived assets’. ‘Deprived assets’ are given away but still deemed yours for the next five years. Sure, Mary can abandon the gifts under her Mum’s Will. However, Centrelink deems the gifts still hers for the next five years.

So what can you do?

Let’s pretend Mary’s mother is still alive. There are many strategies available to them. For example, an Accountant or Financial Planner can go on a legal website (we recommend Legal Consolidated - www.legalconsolidated.com.au) and easily build a 3-Generation Testamentary Trust Will.

The 3-Generation Testamentary Trust Will names Mary and her children as beneficiaries. The 3-Generation Testamentary Trust is flexible. Each beneficiary can receive a portion or none of the estate.

Mary then successfully retains her $1 pension and all-important Concession Card.

Companies and Family Trusts would require a slightly different approach.

Rick Maggi

27/10/14: Deeming Deadline: 1 January 201

Time for action!

Has your financial advisor contacted you about the account based pension (ABP) deeming rule changes effective 1 January 2015?

Don’t miss out If you haven’t, it’s time to act now. If you wish to recommence your ABP before the changes take effect, we recommend you finalise all paperwork by 1 December 2014 to ensure you retain your current income test treatment or you may risk losing it.

Recap of deeming changes On 1 January 2015, ABPs will be added to the definition of financial assets in social security legislation, which means all new ABPs will be subject to deeming rules for both Centrelink and Department of Veteran Affairs income test purposes. Under the new deeming provisions, all financial investments are assumed to earn a certain rate of income, regardless of the income generated.

Grandfathering provisions will be available ABPs commenced prior to 1 January 2015 will retain their current income test treatment where: · The person was receiving an income support payment immediately prior to 1 January 2015 and, from that day, they have continuously received an income support payment. · An ABP automatically reverts to a reversionary beneficiary on the death of the original owner, provided that at the time of the reversion, the reversionary beneficiary is receiving an eligible income support payment.

If you have any questions or if you need help on this extremely important development contact Westmount on 9382 8885.

Rick Maggi Westmount I Financial Solutions