Rejecting Inheritances – S03E04 – Battle of Wills Video Series

Transcript

Adrian Corbould: Thanks, but no thanks. Rejecting inheritances. I’m Adrian Corbould, Accredited Specialist in Wills & Estates at Turnbull Hill Lawyers, with the Battle of Wills series, where I talk about contested estates and wills, generally.

Little known fact, beneficiaries can reject an inheritance. I’ll take you back to the ’80s, when I was in Year 3, primary school. Sister Mary was handing out boiled lollies by hand. I might have had a bit of a germ phobia at that time to which I said to Sister Mary, “Thanks, but no thanks.”

To which Sister Mary did not take that well, and then informed the rest of the class, “What an ungrateful little wretch.” I detected the mood of the room was going south very quickly, so I then said to sister Mary, “I changed my mind, I’ll have that lolly now.” To which she said, “Too bad, you’ve missed your opportunity.” That is not unlike the administration of a will. A will-maker is free to leave in their will whatever they want to whomever they want. Just like an executor can turn down the appointment of being an executor, a beneficiary can reject a gift, but there are some very set terms as to how that can happen and if it should happen.

I’ll give you an example. Let’s say I leave a rusty old Corvette to my nephew and he would have to pay the shipping cost, and once he got that car, he would have to spend a great deal of money repairing it. He might not want that lumbered upon him, so he could say to my executor, “Thanks, but I don’t want that.” To make that gift rejection effective, it would have to be done in writing prior to him accepting the gift.

That would just be a quick deed saying, “I, name, reject gift.” That’s as much evidence as you really need. However, there are some stipulations, he cannot reject the gift once it has been given to him. If he gets it and realises it’s going to be a nightmare to fix, repair, or whatever, he can’t then say, “Oh, executor, you can have that back.” It’s too late. Once you take it, it’s done. Also, as I said before with Sister Mary, once you knock it back formally, you can’t then later on say, “Oh, I’ll have that” if you change your mind. That’s an example of why you would reject a gift. Generally, it’s a movable asset that is just too much pain to take on.

Most people you’d think would accept a gift of cash, who doesn’t want more money? Everyone wants more money. Well, 50% of taxes that are paid in Australia go to Centrelink, half of that half goes to pay pensions, which makes up for a very large sum of taxpayer money. Now, those pensions are based on asset tests. If someone has more assets in a certain amount, their pension is either taken off them or reduced. It’s based on whether you’re a single person or in a couple, and if you own a home and if you don’t. There’re certain amounts, they change throughout the year, every year.

Someone in receipt of a pension, if they receive cash and that puts them over the threshold, that will affect their pension. Can they just merely reject that gift? Well, they can’t because Centrelink has very strong rules that say, if your financial position changes such as receiving a lottery, an inheritance, you must inform Centrelink within 14 days of receipt of that money.

What if we go back and say, “Well, rather than receiving it, how about that recipient just reject it, so they never receive it in the first place?” Well, there are what’s known as deprivation rules which prevent that. If you’re in receipt of a pension, the government would view it to say, why should taxpayers subsidise your income when there’s private monies that could do the same thing. They can’t just gift it away because there’s gifting provisions, 10,000 per year and up to 30,000 over five years. Someone making a will should be considering whether gifting someone money is more of a bane than a boon to the recipient.

There we have it. A beneficiary can reject a gift, but they can’t have been in receipt of it first. If they reject it, they can’t then get it back. If you’re in receipt of a Centrelink payment, that further complicates matters. These are things to think about if you are a will-maker or a beneficiary.

I hope that’s been of interest. Talk again next time.