Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 223

Check pension outcomes when making a will

People's attitudes to money are amazing. They'll spend most of their lives working for it, worrying about it and fighting over it, yet many won't give more than a passing thought to what will happen to it when they die.

Nearly 50% of people die without a will, and most of the remainder seem content to use a DIY job from the local stationery shop, or grab the first free offer they can find. 

A good will reduces costs 

This is an unfortunate attitude because the cost of having no will, or a badly drawn-up will, is far higher than the legal fees to get it right in the first place. One of the most common mistakes is for a couple receiving Centrelink benefits to leave all their assets to the survivor in the event of the death of one of them. The problem arises because the Centrelink income and assets tests are different for couples and singles.? 

Let’s think about a couple in their early 80s who own their home, as well as a car and personal effects worth $30,000. They also have superannuation, bank accounts and other investments totalling $560,000. As a couple, they are entitled to an aged pension of around $18,500 a year. 

If one of them dies, and all assets are left to the survivor, that person will be over the limit for the single pensioner assets test and will lose their pension entirely. That’s a double whammy – losing your partner and your pension simultaneously. If the will had left part of the financial assets to their children, the survivor would have retained a part-pension. 

Preparation goes a long way? 

As always, the solution to the problem is to prepare for it. Long before death is imminent it is wise to involve the entire family to reach agreement on what assets will be left to individual family members if there are any, or other people or entities if there is no family. In the example above, the couple were both elderly and it would be reasonable to assume that their needs for a large amount of investment capital would be less than they once were. 

They certainly can't make gifts now because they would be hit by the Centrelink deprivation rules, but they could frame their wills so that some assets could be left directly to other beneficiaries when one of the partners died. 

Suppose this couple had three children, and changed their wills so that $100,000 of investments went to each child on the death of either parent. The outcome changes completely. The assessable assets for the survivor would reduce to $290,000 and instead of losing the entire pension, they would receive a small increase! The pension would rise to around $20,300 a year. The survivor would have the pleasure of watching the children benefit from the legacy, and would retain an unencumbered property, $260,000 of investments and an increase in pension. 

Just reflect on that for a moment. If the survivor lives for 10 more years, the value of the pension over that time would be close to a quarter of a million dollars, while the peace of mind that would come from retaining the pension and watching the children enjoy the legacy would be priceless. All for a cost of a few hours and maybe a thousand dollars. 

Almost everybody you know will have some story about hassles caused by a badly-prepared will, or worse still – no will at all. That’s a pity, because it doesn’t take much preparation to stop these types of problems before they arise. Just make sure you involve your solicitor, your financial adviser and your accountant when drawing up or reviewing a will, as each is a specialist in a different but important area. 

 

Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. See www.noelwhittaker.com.au. 

RELATED ARTICLES

New role for outcomes test and member goals

Lending policies can spoil good SMSF strategies

Behavioural reasons why we ignore life annuities

banner

Most viewed in recent weeks

Australian house prices close in on world record

Sydney is set to become the world’s most expensive city for housing over the next 12 months, a new report shows. Our other major cities aren’t far behind unless there are major changes to improve housing affordability.

The case for the $3 million super tax

The Government's proposed tax has copped a lot of flack though I think it's a reasonable approach to improve the long-term sustainability of superannuation and the retirement income system. Here’s why.

Tariffs are a smokescreen to Trump's real endgame

Behind market volatility and tariff threats lies a deeper strategy. Trump’s real goal isn’t trade reform but managing America's massive debts, preserving bond market confidence, and preparing for potential QE.

The super tax and the defined benefits scandal

Australia's superannuation inequities date back to poor decisions made by Parliament two decades ago. If super for the wealthy needs resetting, so too does the defined benefits schemes for our public servants.

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

Getting rich vs staying rich

Strategies to get rich versus stay rich are markedly different. Here is a look at the five main ways to get rich, including through work, business, investing and luck, as well as those that preserve wealth.

Latest Updates

SMSF strategies

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

Superannuation

The huge cost of super tax concessions

The current net annual cost of superannuation tax subsidies is around $40 billion, growing to more than $110 billion by 2060. These subsidies have always been bad policy, representing a waste of taxpayers' money.

Planning

How to avoid inheritance fights

Inspired by the papal conclave, this explores how families can avoid post-death drama through honest conversations, better planning, and trial runs - so there are no surprises when it really matters.

Superannuation

Super contribution splitting

Super contribution splitting allows couples to divide before-tax contributions to super between spouses, maximizing savings. It’s not for everyone, but in the right circumstances, it can be a smart strategy worth exploring.

Economy

Trump vs Powell: Who will blink first?

The US economy faces an unprecedented clash in leadership styles, but the President and Fed Chair could both take a lesson from the other. Not least because the fiscal and monetary authorities need to work together.

Gold

Credit cuts, rising risks, and the case for gold

Shares trade at steep valuations despite higher risks of a recession. Amid doubts that a 60/40 portfolio can still provide enough protection through times of market stress, gold's record shines bright.

Investment strategies

Buffett acolyte warns passive investors of mediocre future returns

While Chris Bloomstan doesn't have the track record of his hero, it's impressive nonetheless. And he's recently warned that today has uncanny resemblances to the 1990s tech bubble and US returns are likely to be disappointing.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.