How will an inheritance affect your Age Pension entitlements? Many Retirement Essentials ask this question. As life expectancy increases, it’s not unusual for people to receive an inheritance much later in life—often when they are already retired and receiving an Age Pension.
If you do receive a lump sum inheritance (or any lump sum), there are some important things you need to know to avoid unexpected pension reductions or even overpayments that need to be repaid.
You must tell Centrelink
It’s essential to notify Centrelink within 14 days of receiving any lump sum. Failing to do so can result in overpayments that must be repaid, which can be difficult if the funds have already been spent.
Susan and Terry’s inheritance dilemma
Susan, 70, and Terry, 75, received a $400,000 inheritance. They own their own home with a $180,000 mortgage and have $470,000 in combined super. They also like to keep a cash buffer of $15,000 for emergencies, and value their personal assets at $25,000.
Currently they are receiving $41,735 in Age Pension as a couple, and they draw down their additional spending needs from their Account-Based Pensions.
Their top three questions were:
Would gifting inheritance money to their children affect their pension?
Should they pay off their mortgage?
What’s the best way to use the money without losing Age Pension benefits?
