Best place to put a legacy after you have retired

I HAVE been bequeathed $20,000 and do not know how best to invest this unexpected gift. I am 68, female, retired, but work the odd day per month. My super account is still open with a balance of $8000, I receive the full age pension and own my own home worth $450,000. I have no savings. I do not have funeral bonds. What would you suggest?

The only purpose of superannuation is to save tax and, as you are not paying tax now, I see no point in adding the bequest to your super. In fact, it would make sense to withdraw the current balance in super to save fees.

The receipt of the money will not affect your pension, so there is no need to tie up money in funeral bonds unless you are concerned that your estate or your family will be unable to pay for your funeral when you die.

Look for a bank account that pays a reasonable rate of interest, and make sure you keep enough funds in an at-call account for unexpected expenses.

COULD commuting a portion of the money I have in super in accumulation mode affect my current eligibility for the Commonwealth Seniors Health Card (CSHC)? Will the commuted amount be assessed by Centrelink as a new fund and result in my pension from the $1.6m in retirement mode being assessed as income?

A departmental spokesperson confirms that since January 1, 2015, the CSHC has been subject to an income test whereby any deemed amount from account-based income streams has been added to a person’s adjusted taxable income to determine eligibility for the CSHC.

If you have a grandfathered account-based income stream (also known as an allocated pension) – meaning you held an account-based pension before January 1, 2015 and continue to be assessed under the old deeming rules – only your adjusted taxable income will be used to determine your eligibility for the CSHC.

Should you fully commute the existing allocated pension and buy a new account-based income stream, the grandfathered status will not apply to the new product and it will be assessed for the CSHC under the current deeming rules.

Making a partial commutation and transferring the proceeds from the pre-2015 allocated pension into the accumulation phase will not affect the income assessment for the CSHC, unless this alters your adjusted taxable income.

If a new account-based income stream is purchased using the money from the superannuation investment in the accumulation phase, the deemed income from this account-based income stream will be included in the CSHC income test.

Noel Whittaker is the author of Making Money Made Simple and other finance books. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Email: noel@noelwhittaker.com.au

Since January 1, 2015, the Commonwealth Seniors Health Card has been subject to an income test