Ask Paul: Can I give my 13-year-old $400k so I don't lose my disability pension?

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Dear Paul,

I'm 39 with two children, aged 19 and 13 and I'm on a disability support pension.

My husband works one day a week and is my full-time carer - he receives carer's payments from Centrelink.

ask paul clitheroe should i give 400k to my son so I can keep receiving disability support pension

I'm saddened to say that my dad passed away in May and my mother passed away in early June. I lost both of them in just 17 days. My hurt is beyond words.  

After the sale of my parents' house, I would inherit about $400,000.

I simply cannot refuse to take this money, but if I accept it Centrelink will stop my DSP and my husband's carer payments. My monthly prescription medication for my disability is $153 plus regular doctor visits. 

My 19-year-old daughter is not talking to us and can't be trusted since she left us to move to the US. She is married and has no plans to come back to Australia.

Can I give my son all the funds without affecting our Centrelink payments? Can I put my inheritance into my husband's super since I don't work?

I still have my super with REST. I used to work at a department store but due to my disability, I quit last year. - Paula

Paula, you have been having a tough time. My commiserations about losing both your parents, in particular in such a short period of time.

We have three children, now in their 20s and 30s, so I can also imagine how distressing a rift between parents and a child must be. As your daughter matures, my hopes are that you are able to reconnect in a positive way.

Then on top of that you have had to retire from work due to your disability.

In terms of your life, though, the inheritance of some $400,000 is a life-changing amount of money. I do understand the impact it will have on your disability payments and also your husband's carer payments, but let's look at the positives.

I will need you to talk to your super fund, as I do not have the detailed knowledge of your situation to give any specific advice.

I would not be surprised if between you and your husband you were able to add this amount to your two funds, but it is essential to get the details correct.

If you were to do that and the fund continued to earn around 6% to 8% a year, as super funds have done for decades, then the $400,000 would earn you some $24,000 to $32,000 a year on average. That really is a significant amount.

But we need to consider if superannuation is your best option.

First, no, you can't give it to your son. Pension payments have "deprivation" provisions if you give it away like this.

Regardless of that, giving a huge amount of money to a 13-year-old makes little sense to me. Imagine if you had done that with your daughter? Also, you say you can't refuse the money, but why would you? Such a large amount, sensibly invested, should provide returns well beyond government payments.

In terms of getting rid of it, you could blow it on lifestyle spending in no time all. Sadly, I have seen this done to preserve pensions, but this seems to me to be madness.

About the "least worst" way of getting rid of money without impacting government benefits is to upgrade your family home, put in a new kitchen and so on. This is not "deprivation" of your assets; it is a personal choice. Your home will be an exempt asset.

But even investing in your own home, or a better home, just to protect a pension seems really crazy to me if you do not need a new home and your current place is in good condition. If you had a mortgage, paying that off could be a good money decision and reduce your pension assessable assets.

These personal and investment decisions I must leave to you. But my general advice is very clear.

Work out your best plan for this money, including your home and possible necessary renovations. Then chat to your super fund and check your options there. Seek independent advice if you think that would help.

My best wishes to you and your family.

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the Money TV show, and this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Click here to email Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. Please view our disclaimer here.
Comments
Concerned People
August 4, 2021 5.26pm

Astonishing someone wants to keep milking the tax payer and is prepared to give significant sums away to a child to be able to continue to do so. Nice one Paula..

Also Concerned
August 4, 2021 5.36pm

Not to mention the fact that the adult daughter isn't talking to them and "can't be trusted" just because she moved to another country.

You have to wonder what messed up family dynamic she's fortunate enough to have escaped!

Tony de Kort
August 5, 2021 9.00am

Paul makes the statement that "First, no, you can't give it to your son. Pension payments have "deprivation" provisions if you give it away like this". This is untrue- The fact is - they can give the money to the son, but it will be counted by Centrelink for 5 years.

Davis Go
September 1, 2021 6.03pm

It's an appalling attitude!

Take some responsibility for you self, rather than the rest of us paying for you

Peter Goerman
August 4, 2021 5.53pm

Typical gimme-gimme mentality! With $400,000 in the kitty, why not take responsibility for yourself instead of asking the taxpayers to keep funding you.

Reminds me of a former neighbour who had a huge amount of cash literally buried in the backyard because "getting my pension is my right!!!"

Then there used to be those no-interest-earning bank accounts (which the banks loved); deeming rates took care of that. Sadly, her mindset is NOT in the minority.

Judith Lee Schloffer
August 4, 2021 7.03pm

Whilst I understand many people's anger at what they consider ostensibly rorting of the system, I think it is worth taking into account this person's disability status, deep grief at recently losing both parents as well as sadness at the current estrangement with a daughter.

Fear of not having a consistent income can only really be understood by those who have actually experienced it. I hope Paula is able to get some free financial advice from a community financial adviser who may well recommend a legitimate strategy to enable this family to continue to have a steady income stream.

Meggan Anderson
August 4, 2021 7.23pm

Paula should talk to a Financial Information Service Officer at Centrelink before making any decisions, as they can discuss the implications of different scenarios on her payments.

There are implications around gifting for example.

I wish this service was promoted more because I see so much misinformation and wrong advice given to people about Centrelink on social media and by financial advisers.

Mike Richards
August 4, 2021 9.55pm

Hopefully she's as candid with them as she is here so they can put a big red flag on her file and keep watch where it goes, because it irks me that even with $400k (which, if done properly, will set you up VERY nicely for a long time), she even thought about "how can I hide it", rather than "how can I get off welfare ?". OK, you're on a DP, fair enough. But deliberately rorting the system ? This mentality makes me sick.

Zizi K
August 4, 2021 10.09pm

Well said Judith. Her situation really isn't much different than what most pensioners, particularly wealthy ones on all accounts, are doing to move cash or assets around to ensure they at least get the part pension.

Having a disability in your 30's where you are unlikely to work again would be truly difficult, $400k really isn't that much when you factor in how long we currently live for and what her earning potential would be. I second the other opinions to speak to Centrelink or a free financial adviser. I hope you and your family heal from your pain and find viable solutions.

On a personal note I left home at 19 in not so great a way, 19 is super young! Super super young so please be patient with your daughter and realize she's probably still figuring herself out and will come round. Best wishes for your health and family.

Helpful Words
August 28, 2021 4.30pm

Agreed. I'm sure anyone in this position, unable to work and with your partner as your carer, would aim to retain any regular income streams as much as they possibly could.

The question is simply asking what's possible and within the rules. I commend Paula for exploring all of her options during a time that has clearly been turbulent and traumatic.

Shame on those who have commented without any kind of empathy and a total lack of consideration around the reality of Paula and her husband's financial future and their inability to earn a full time salary.

It's very easy for those making hurtful remarks to sit there on their high horse and criticise this questioner's attempt to become more educated and informed around the rules and regulations that could either set her family up for a reasonable financial future or see them financially flop because she didn't explore her options when she had the chance.

Sigrid de Kaste
August 5, 2021 6.16pm

I'd be very interested to know where you get 6% to 8% a year in a super fund?

Also, $400,000 is nothing, if you spend just $20,000 a year (and they still have a 13yr old) it takes just 20 years for it to begone - who here of the people judging this family survives on $385 a week??? (which is what $20,000 a year works out to be???)

Glenn J
August 5, 2021 6.27pm

"I'd be very interested to know where you get 6% to 8% a year in a super fund?"

I'm with Australian Super and it returned more than 20% last financial year. https://www.australiansuper.co...

So literally any half decent fund should be returning a measly 6%.

Stella S
August 5, 2021 6.30pm

You're assuming they leave the $400,000 buried in a jam jar in the backyard.

Invested in anything they will have more to spend. Term deposits, a cheap investment property, shares, peer to peer lending, super...

Davis Go
September 1, 2021 6.05pm

Most balance funds have returned that on a regular basis, do some Googling.

Sanjeev Pal
August 8, 2021 11.07am

To all those talking about rorting the system, I hear you. But you are probably forgetting that Paula had to give up work, and with her husband as a full time carer also would have needed to give up their career. None of us are in there shoes so, we should probably avoid any judgment. Government has plenty of compliance resources, if there is any rorting time would catch up. Although, to qualify for DP Paula would have needed to do enough to prove that she qualifies. Her response on giving it away is likely coming from her knowledge that $400k wouldn't last a lifetime, and she maybe aware of how difficult it is to get DP. Not having financial freedom can be fearful.

I am not in Paula's, and hope not to be in her shoes, because I wouldn't be able to walk a mile.