Question: I am hoping you can confirm that a strategy I intend to implement, will achieve what a want.
Most couples have wills which in the first instance, leave all of their assets to the surviving partner, then to their children when the last person dies. When one partner dies, both Centrelink means tests are set at much lower levels for a single person.
The receipt of the assets and income by the surviving partner may well see them lose part or all of their pension. In my mind, it would be best for both of us to maintain equal investments in our respective names and we each then leave these to our children when we die. That way, the remaining partner will not have an excess of assets or income that may then impact on the age pension of the surviving partner.
Answer: What you have proposed is a strategy which many planners will pursue after having detailed discussions with a client.
As you have identified, assets owned jointly will automatically pass to the surviving owner through the concept of survivorship and on that basis, never form part of the deceased’s estate to be dealt with by the will.
That means that joint bank accounts, real estate holdings, shares and other assets could be included in the surviving partner’s Centrelink means-test calculations from the date of death. For that reason, holding assets individually can be an advantage.
There are no restrictions on who you leave those assets which form part of your estate to.
By by-passing your spouse in the will, those assets would never be assessed.
Incidentally, your spouse cannot re-direct potentially inherited assets to your children to avoid assessment. This would be captured under the deprivation or gifting rules.
For you to pursue this strategy with superannuation based assets, you would need to complete a non-lapsing binding death nomination form which would specify that the super funds are left to your estate.
In this case, A financial planner would also consider the probable tax liabilities on the taxed portion of the superannuation fund death benefits generated by the benefits being paid to your estate. That would weighed up against the Centrelink benefits lost if your spouse received the super benefit directly.
You would also want to ensure that your spouse has sufficient means on hand to fund any future expenses. This might include a Refundable Accommodation Deposit (RAD) for an aged care facility place, typically up to $550,000.
Finally, this strategy should consider the broader risks of leaving assets to children who’s own circumstances might be problematic. This could include relationship and financial difficulties. In that case, you might also consider seeking specialist legal advice from an estate planning lawyer to protect those assets when they are transferred.
IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.