4.1.5 Deprivation related to deceased estates, superannuation funds & separation
Summary
This topic discusses the deprivation provisions for:
- a person's interest in a deceased estate
- a person's interest in a superannuation fund, and
- couples (1.1.M.120) separated by
- relationship breakdown, and
- illness (1.1.I.04).
Information on how to calculate the TOTAL deprivation amount for a person is provided in the referenced topic.
Policy reference: SS Guide 4.1.1 General provisions of deprivation
Person is executor of deceased estate or trustee of a superannuation fund
Where a person is an executor of the estate, or the trustee of a superannuation fund, the gifting provisions do not apply to actions the person takes in their capacity as the executor or trustee.
Explanation: The gifting rules would not apply because the executor/trustee holds the assets of a deceased estate, or a trustee holds the assets of a superannuation fund on behalf of the beneficiaries and potential beneficiaries of the estate or superannuation fund. The person does not have any personal interest in the assets, derives no benefit from the estate or superannuation fund and therefore their pension or allowance is not affected.
Person is beneficiary of deceased estate, or has interest in a superannuation fund
Deprivation provisions apply to a person's interest in a deceased estate or superannuation fund IF the person:
- waives their right to their interest in the deceased estate or superannuation fund and the person obtains no, or inadequate consideration, OR
- directs the executor of the will or trustee of the superannuation fund to distribute their interest in the deceased estate or superannuation fund to a third party and the person obtains no consideration, or inadequate consideration, OR
- gives their interest in the deceased estate to a third party after the estate has been finalised for no or inadequate consideration, OR
- gifts their interest in a superannuation fund.
Explanation:
- A person is regarded as having received adequate consideration where the executor or trustee of the superannuation fund acting in a bona fide capacity accepts other bona fide claims on the estate or superannuation fund and the person enters into an agreement with the executor or trustee not to sue for the reduction of their interest in the estate as a result of the executor or trustee's acceptance of those claims.
- The person should be asked to obtain evidence of the bona fides of those claims, for example a legal opinion which states that the claimants have a reasonable prospect of success if they took their claims to a court.
The provisions apply EVEN if:
- the person is the executor of the estate, OR
- the deceased died without a will.
Explanation: The estate is administered according to the relevant state law.
Person is executor/trustee & they or their partner are a beneficiary of the deceased estate or have an interest in the superannuation fund
Where a person is both the beneficiary of a deceased estate and the executor of a deceased estate, it is necessary to determine whether the person is acting in their capacity as executor or as beneficiary. Actions of the executor/beneficiary are regarded as separate, even though they are the same person. Similarly, where a person has an interest in a superannuation fund and is the trustee of the fund, it is necessary to determine whether the person is acting in their capacity as trustee or as beneficiary.
| Actions as … | Deprivation provisions |
|---|---|
|
Executor/Trustee |
The gifting provisions do not apply to bona fide actions the person takes in their capacity as executor or trustee. Actions of the executor or trustee and the assets of the estate or superannuation fund would be regarded as separate from those of a social security person even though they are the same person. An executor would be regarded as acting in a bona fide capacity where the executor is acting in accordance with the terms of the written will. The executor may settle claims against the estate, (e.g. from family members omitted from the will). To establish that the person is acting in a bona fide capacity, the executor or trustee should be asked for evidence that supports those claims, for example, a legal opinion which states that the claimants have a reasonable prospect of success if they took their claims to a court. Such evidence could also include the records of any alternative dispute resolution process with an independent arbitrator. Where the executor or trustee is considered not to have acted in a bona fide capacity the gifting rules apply to the extent of the amount gifted which was due to them as a beneficiary of the estate or superannuation fund. |
|
Beneficiary |
See above (Person is beneficiary of deceased estate). |
Date of disposal
The date of disposal is determined by how a person disposed of their interest in the deceased estate or superannuation fund, as shown in the following table.
| If a person … | then the date of disposal is the later of the date … |
|---|---|
|
waives their right to their interest in the deceased estate or superannuation fund |
the interest was waived, OR the person would have been able to receive their interest in the estate or superannuation fund. Example: A person waives their interest BEFORE they are able to receive it. The date of disposal is the date the beneficiary would have been able to receive their interest. |
|
instructs the executor of the will or trustee of a superannuation fund to distribute their interest in the deceased estate or superannuation fund to a third party |
the person instructed the executor or trustee, OR they would have been able to receive their interest in the estate or superannuation fund. |
|
gives their interest in the deceased estate or fund to a third party |
the person gave their interest to the third party, OR they would have been able to receive their interest in the estate or superannuation fund. |
Act reference: SSAct section 1118(1) Certain assets to be disregarded in calculating the value of a person's assets …
Policy reference: SS Guide 4.6.5.80 Assessing interests in a deceased estate
Separated couples
The amount of disposition held against members of a couple who separate is effected by:
- the original ownership of the asset (1.1.A.290), AND
- whether the reason for the separation was
- relationship breakdown, OR
- the death of one of the partners (1.1.P.85).
Relationship breakdown
The following table explains the change in disposition amounts for couples who have permanently separated because of a relationship breakdown.
| If the disposed of asset or income was owned … | the amount of disposition … |
|---|---|
|
jointly |
does not change for either partner. Explanation: 50% of the value of the asset or income continues to be held against each person. |
| by one partner | becomes fully held against the partner who owned the assets or income. |
When a person gives away assets as a result of a court order or property settlement following a relationship breakdown, it is NOT regarded as deprivation for social security purposes, as satisfying the demands of a court order or property settlement is regarded as adequate consideration for the asset.
Death of a partner
The following table explains the change in disposition amounts for couples where one partner has died.
| If the asset or income was owned … | the amount of disposition held against the surviving partner … |
|---|---|
|
jointly |
does not change. Explanation: The amount held against the deceased partner is NOT transferred to the surviving partner. |
|
by the deceased partner |
is reduced to zero. Explanation: The asset or income was NOT owned by the surviving partner. |
|
by the surviving partner |
increases by the amount held against the deceased partner by the outstanding balance held against the deceased partner. Explanation: The asset or income was owned by the surviving partner and so the outstanding balance of the value which was formally shared between the 2 partners is held against the surviving partner. |
Act reference: SSAct section 1123 Disposal of assets