As you have already inherited the money, I presume you have disclosed this to Centrelink within 14 days of receipt.
As for the potential impact on your pension, that depends on the following:
- The amount of assets you already have; and
- The amount you have inherited.
Deeming Rules will apply to your situation, and the inheritance will be added to your existing assets. So, assuming you have received the inheritance, then it may have already impacted your pension (if the inheritance money pushes you to be above the asset limit).
As a guide, the asset limit for a single homeowner to obtain full pension is $0-$268,000 and part-pension is $268,000-$583,000 (note: your home is not counted as an asset). These amounts may vary, depending on your situation. See this link to determine the levels that might impact you: https://www.servicesaustralia.gov.au/individuals/services/centrelink/age-pension/how-much-you-can-get/assets-test/assets#assetstestlimits.
Setting up a trust for your grandchildren can be done two ways, depending on whether you have the receipt of funds yet, as follows:
- If you already have the inheritance money, you only have one option which is to set up the Trust and put the money in there.
- If you don’t have the funds yet, you can transfer the inheritance to a third party (ie. your Grandchildren).
Either option is classed as ‘gifting’ and Centrelink has strict rules on the amount you can gift.
Amounts gifted above $10,000 per financial year and $30,000 over 5 consecutive financial years are considered as an asset and deemed to earn income for the next 5 years. Essentially, you could be inadvertently cause a reduction in your Pension, or it may even be cancelled, in addition to gifting your assets.
The outcome may all depend on the amount of the inheritance.
Unfortunately, the only way for a lump sum inheritance to not impact your pension when gifting to the grandchildren would be to go back in time and have your mother’s Will include a Testamentary Trust prepared to allocate the inheritance to your grandchildren in a trust account. This would mean the funds are sent directly to them, rather than through you (and the asset being deemed as your asset).
I would highly recommend that you have the conversation with your children and determine whether they would prefer your estate be allocated directly to them, or have it left to the grandchildren to avoid them potentially being in a similar position to you in future.
An estate planning solicitor can assist with ensuring your will and estate planning is effectively prepared as proper planning is important to ensure this situation does not happen to future generations of your family (if that is your wish).
If the inheritance is sizeable, there is a potential it has impacted your pension and the best thing you can do is go and see an independent financial adviser to help you invest it, so that you can use it wisely.