Where there's a will there's a way
THINK about an elderly couple who own their home, and personal effects worth $30,000. They also have financial assets investments worth $560,000. As a couple, they are entitled to an aged pension of about $18,500 a year.
If one of them dies, and all assets are left to the survivor, that person will be over the limit for the single pensioner assets test and lose their pension entirely. If the will had left part of their assets to their children the survivor would have retained a part-pension.
Long before death is imminent it is wise to involve the entire family to agree on what assets will be left to individual family members if there are any, or other people or entities if there are no family. In the example above, the couple were both elderly and it would be reasonable to assume that their needs for a large amount of investment capital would be less than they once were.
They certainly can't make gifts now because they would be hit by the Centrelink deprivation rules, but they could frame their wills so some assets could be left directly to other beneficiaries when one of the partners died.
Suppose this couple had three children and changed their wills so that $100,000 of investments went to each child on the death of either parent. The outcome changes completely.
The assessable assets for the survivor would reduce to $290,000 and instead of losing the entire pension, they would get a small increase! The pension would rise to around $20,300 a year.
The survivor would have the pleasure of watching the children benefit from the legacy, and would retain an unencumbered property, $260,000 of investments and an increase in pension.
Just reflect on that for a moment. If the survivor lives for 10 more years, the value of the pension over that time would be close to a quarter of a million dollars, while the peace of mind that would come from retaining the pension and watching the children enjoy the legacy would be priceless.
It doesn't take much preparation to stop these types of problems before they arise. Just make sure you involve your solicitor, your financial advisor and your accountant when drawing up or reviewing a will - each is a specialist in a different but very important area.
Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Email: firstname.lastname@example.org