Impact of inheritance on Age Pension

For many, inheritance is a blessing and unexpected improvement of lifestyle and value of the estate, but sometimes it can impact your Age Pension entitlement, and at that point it is hard to figure out: “should I be happy about this new fortune, or would I lose my Age Pension because of it?”

Centrelink will only start counting the inheritance under Income and Assets test once distributed from the deceased estate to you as a beneficiary. Centrelink knows well that sometimes the probate takes longer than few weeks, so they give you 12 months to sort out the estate issues, but if there is a challenge or other major problem, as long as you update Centrelink accordingly, they will not consider those assets as yours until the estate has been finalised. When you receive the inheritance, it is not treated as an income. I receive this question very often. Inheritance is a lump sum payment you receive, and it is treated like any other asset you own, it is subject to Assets Test and Income Test under deeming rules, just like most other asset you might have.

So, I repeat again, inheritance is not treated as income, but rather increase of value of your assets and increase of your deemed income. The best thing you can do is to prepare yourself for receiving your inheritance, as those will become your extra financial assets. Plan in advance what you are going to do with those assets, especially if the inheritance is going to reduce your Age Pension entitlement or remove it altogether.

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