At times, as Estate Specialists, we are asked questions relating to the implications for gifting their inheritance to other family members.  One such elderly couple came to us asking if they could gift their share of an inheritance to their daughter.
Obviously this couple had no need for the inheritance and wanted to provide the benefit to someone who would genuinely needs it. The amount involved was said to be about $150,000.
In such a situation it is important that all involved are aware that if they gifted this amount to anyone, including their own daughter, that Centrelink will investigate this gift and assess the couple as owning the money which may (or may not) affect their pension.
Centrelink provisions allow you to gift $10,000 per financial year with a maximum of $30,000 over a five year period.
You are free to gift as much as you like, no one can stop you, however, for Centrelink purposes the transfer of wealth beyond the amounts noted above will be assessable under a means test.
What the article in the Sunday Mail did not say (beyond the standard line of go see a lawyer), is that there are other options available to transfer or gift this wealth which will not affect a pension.
Disclaimer
A disclaimer is an effective waiver of an interest in a deceased estate.
If made too late in the administration of the estate Stamp Duty may actual be payable on the disclaimer (by way of example the disclaimer of $150,000 made too late may attract Stamp Duty of $4,830).
During the early stages of the administration of a deceased estate the executor is still gathering in assets and assessing the extent of liabilities (including tax) that needs to be paid. At this time a beneficiary has no entitlement to any fixed interest other than to demand the due administration of the estate. As such, a disclaimer made at this time will not attract Stamp Duty.
If the executor’s role has morphed into that of being trustee, holding the assets of the estate for the beneficiaries, then a disclaimer made at that time may require Stamp Duty to be paid.
Deed of Family Arrangement
If a more significant disclaimer is warranted, perhaps the Will provides for a life interest in a piece of real estate that the beneficiary does not wish to receive, then a Deed of Family Arrangement could be signed, virtually a contract between all of the people involved, including the executor, to amend or change the terms of the Will.
The Deed will then obligate the executor to act differently in regards to the distribution of the estate however, like above, the Deed may act as a formal disclaimer meaning that Stamp Duty will be payable on the benefit disclaimed.
The Time Machine
The best solution may only be possible by using a time-machine.
If the deceased (whilst still alive of course) prepared a more comprehensive Will which involved one or more Testamentary Trusts then the benefit/gift/inheritance will be found within the trust and as such can be siphoned out to those who may most need it.
Reflecting on the opening scenario discussed in the Sunday Mail the elderly couple should have been named as trustees of a Testamentary Trust of which the $150,000 is funded, being trustees the elderly couple could have determined that their daughter, a class of general beneficiary in the Will, could benefit from the fund and provide it to her – no tax – no stamp duty – no worries.
Conclusion
When dealing with clients intending to achieve certain estate planning goals, one of the major questions we ask is whether there is any inheritance they will likely benefit from (for instance, their own parents). If so, and it is common, Welden & Coluccio Lawyers strongly recommend that our client’s parents also undertake a thorough estate plan.
Quite simply, the wording of the Will of a person’s parents may affect them in more ways than they realise.
To avoid the added stress on families during an already emotional time, it may be wise to meet with an estate planning lawyer at Welden & Coluccio Lawyers to help you draw up a your estate plan.