The importance of the right will
MUCH has been written about the importance of having a valid will, but getting the will right is just as important as getting it signed.
Usually older couples make out what we call "I love you" wills whereby they each leave all their assets to the survivor in the event of a death of one of them. This might be fine in some circumstances, but it can have devastating consequences if they are receiving the aged pension.
This is because the asset test for a homeowner pensioner couple is much harsher than for a pensioner single. Couples can own up to $1,018,000 of assets, plus the family home before losing eligibility for the pension - for a single the cut off point is just $686,000.
Think about a couple with assessable assets of $600,000 and who are receiving a combined pension of $626.50 per fortnight. If one died and all the assets went to the survivor, they would be assessed as a single pensioner and the pension would drop to just $128.93 a fortnight. That is a reduction in income of almost $500 a fortnight or $13,000 a year.
The problem is that a one person household has almost as much household expenditure as a two person household. The surviving spouse could find themselves with severe cash flow problems at the same time as they are trying to cope with the death of their life partner.
A better option may be to leave part of the assets to a relative such as a child. Of course this does not work in all circumstances - advice also needs to be taken about whether this would have any effect on the entitlements of the recipient ,and whether the money is likely to be lost if that relative has a relationship breakdown.
Noel Whittaker is a director of Whittaker Macnaught Pty Ltd. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. His email is email@example.com. Or follow him on Twitter @NoelWhittaker.