DATE OF ISSUE: 15 DECEMBER 1997
CLARIFICATION OF POLICY REGARDING DISPOSAL OF ASSETS BY A BENEFICIARY OF DECEASED ESTATE
Purpose of instruction |
The purpose of this instruction is to advise staff of Departmental policy regarding the disposal of assets by a beneficiary of a deceased estate, where the beneficiary:
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Background |
Current Departmental policy as contained in the General Orders Service Pension (GOSP ) does not address disposal of assets in the circumstances described above. A clear statement of policy on this issue is therefore required. Similar guidelines recently issued by the Department of Social Security have generated inquiries from Veterans' Affairs clients about our policy on this matter. |
Issues
Ownership and relinquishment of property |
The main issues involved in the disposal of property by a beneficiary concern legal ownership and the right to relinquish property assigned under the will. These are detailed below. |
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Issue 1 |
When does property become the property of the beneficiary and therefore forms part of the person's asset? Answer: When the estate has been administered, and the property transferred to the beneficiary under that administration. Until the estate is administered, the beneficiary has no particular property under the will, either as legal or beneficial owner. |
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Issue 2 |
Does a beneficiary under a will have the right to refuse to accept any property that might be left to them under the will? Answer: Yes. A judgement made by Chief Justice Abbot in the case of Townson v Tickell stated “The law is not so absurd as to force a man to take an estate against his will”. |
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Assessment under the deprivation rules
Has deprivation occurred? |
Follow the table below to establish if action by the beneficiary constitutes disposal of assets and if deprivation rules apply. |
If the ........... |
And the.......... |
Then........... |
estate has not been administered |
beneficiary relinquishes right to property |
disposition of property has not occurred |
estate has not been administered |
beneficiary:
|
disposition of property has occurred, and deprivation rules apply |
estate has not been administered |
beneficiary, who is also the executor:
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disposition of property has not occurred |
estate has been administered |
beneficiary:
|
disposition of property has occurred, and deprivation rules apply |
Changes to the General Orders Service Pension (GOSP)
Amendments to the GOSP |
New paragraphs outlining the new policy have been added to the following GOSP sections:
These are detailed at Attachment A. |
Contact Officer |
Should you have any queries regarding these instructions, please contact Freda Widawski on telephone 02 92137487 or electronic mail “Widawski, Freda”. |
Authorised by |
R J HAY BRANCH HEAD INCOME SUPPORT |
Attachment A
AMENDMENTS TO THE GOSP
DISPOSAL OF ASSETS AND/OR INCOME
Insert after “Realisation of Life Interest” new heading and paragraphs:
Beneficiary Of A Deceased Estate
Where a person is left an asset in a will but chooses to relinquish the right to receive that asset, or transfers that asset to another person, the question of whether the deprivation provisions operate will depend on whether the property left in the will constitutes an asset of the person to the point of disposal.
Until the estate is administered, the beneficiary has no particular property under the will, either as legal or beneficial owner. In other words, until the property has been transferred to them, it is not their property. Therefore, if they relinquish their right to receive that property before the completion of the administration, there is no asset nor any corresponding disposal of an asset.
However, where the person relinquishes their right to receive property before the completion of the administration, and then directs that the asset be passed to another person, they have demonstrated that they already have beneficial ownership of that asset. By taking action to pass that asset to another person, they have “engaged in a course of conduct that diminishes the value of their assets” and deprivation provisions would apply*. Section 52E(1) refers.
Example :A service pensioner is named beneficiary in a will for a farming property. He decides not to accept the property, but to transfer it to his son.
In this case, the value of the farm (above the gifting limit) would be assessed under the asset test for service pension purposes, and deeming provisions would apply.
*Note: The exception to this rule is where the person is the executor and also a beneficiary of the estate. In this situation, the transfer of property to another person would not constitute disposal.
Similarly, once administration of the will has been completed and the property transferred to the person, any action that they take to relinquish the asset or transfer it to another person would constitute disposal, and deprivation provisions would apply.
When determining if disposition of property has occurred, regard will have to be given to whether or not the property has been transferred to the person.
Usually, gifts of personal property made by a will can be judged to be the assets of the beneficiary when the executor gives assent that the property is no longer required for purposes of administration and may therefore pass according to the will.
However, in some cases, some further formal act may be necessary in order to pass legal title to the beneficiary - for example, shares or real estate have particular requirements.
Where a person notifies that they have relinquished their right to receive the property from an estate, it will be necessary to establish if the estate has been distributed, and if so, did the person have legal title to the property prior to disposal. All inquiries should be directed to the executor or administrator of the estate.
ESTATES
Insert new paragraph at end of section:
Where a beneficiary of an estate relinquishes their right to property or transfers that property to another person, investigation will need to be undertaken to determine if disposal of assets has occurred. For more information refer to beneficiary of a deceased estate.