Will Centrelink view using assets from a deceased estate to pay off a mortgage as a gift?

Question from a Client:

“My mother was named as executor of my brother’s Will to dispose of assets as she sees fit. She gifted me a large sum to pay off my mortgage. I was wondering if Centrelink (who have a $10,000 per annum gift limit) would view this as her gifting or we are able to argue that it was the estate?”

Answer:

Without knowing the exact wording of the Will or the size of the amount given to you by the estate or what Centrelink entitlements you and your mother are currently on, I would make the following general comments which are not intended to provide you with personal legal advice:

1. A person may receive income as a lump sum. A lump sum is a one off payment. If a person receives a lump sum of over $2,000.00 they need to tell Centrelink within 14 days so Centrelink can assess it. The first step is if the amount was over $2,000.00 to let Centrelink know.
2. Some lump sums are exempt from the income test, usually if these lump sums are unlikely to be repeated or were not paid to you as a result of service you provided or profit. Exempt lump sums include an inheritance.
3. Depending on how you spend the lump sum may affect your Centrelink payments under the income or asset test. If you spend the inheritance on an exempt asset such as your mortgage it should not change the value of the assets that are used to assess your entitlements. Again Centrelink will need to be told and assess this on your individual basis.
4. If you put the money into your bank account or used it to buy an investment that would be deemed as increasing your assets and may affect your entitlements.
5. Centrelink would probably require to see a copy of the will and/or Probate if granted. If it was your mother who was named as the beneficiary under the will and has gifted more than $10,000.00 in the year she may be deemed to have deprived herself of an asset that she was to receive from her inheritance and this could affect her entitlements even though she did not receive the money.
6. The actual terms of the will of your late brother will determine if Centrelink views it as an inheritance you were entitled to have or whether your mother has deprived herself of an inheritance. Either way you both have to notify Centrelink within the 14 day period if you were both receiving either a pension or benefit.