Our examples use the Doe family: Jane (48) and John (50), their children Mia and Leo, Jane's sister Sarah, and Jane's mother Rose (80), who owns her home and receives the full Age Pension. This guide sits alongside our estate planning services.

How does Centrelink assess an inheritance?

Services Australia works out a pension under 2 tests, the assets test and the income test, and pays whichever gives the lower amount. An inheritance received outright is caught by both.

• Assets test: cash, shares, an investment property or any other asset you inherit is added to your countable assets. Above the threshold, the pension falls by $3 a fortnight for every $1,000 over. If an inheritance takes Rose $100,000 over her threshold, she loses about $300 a fortnight, or about $7,800 a year.
• Income test and deeming: bank accounts, term deposits, shares and managed funds are treated as earning a set "deemed" rate, whatever they actually earn. Rose's $100,000 in a term deposit is treated as earning the deemed rate even if her bank pays her less.
• Aged care fees: the aged care means test draws largely on the same assessment of assets and income, so an inheritance can also increase aged care fees.

The thresholds and deeming rates change regularly, so we do not quote them here. Check the current figures on the Services Australia website or speak with Services Australia or a financial adviser about your own numbers.

When does an inheritance start to count?

A person's interest in a deceased estate is not counted while the estate is being administered. It starts to count once it is received, or once it could be received. Centrelink generally treats a beneficiary as unable to receive their share for up to 12 months after the death, unless the estate is finalised sooner.

After 12 months, Centrelink looks at what is holding the estate up. If the beneficiary is causing the delay, the share can be treated as available and counted. If the delay is outside their control, for example unpaid estate debts or an executor with a discretion over distribution, it is generally not counted yet.

A pensioner must tell Services Australia about a change in their circumstances, including receiving an inheritance, generally within 14 days. If an attorney manages the pensioner's affairs, they can generally deal with Services Australia within the limits of the power of attorney, but the power of attorney does not automatically make them a Centrelink nominee. A separate nominee arrangement is needed for some things, such as access to the pensioner's Centrelink online account.

Can a pensioner just refuse or give away the inheritance?

Usually not without consequences. Centrelink's deprivation rules treat these as gifts:

• Disclaiming: waiving or refusing an entitlement under a will or on intestacy.
• Redirecting: asking the executor to pay your share to someone else, such as your children.
• Giving it away later: passing the money on after the estate is finalised.

A pensioner can give away $10,000 a financial year, up to $30,000 over 5 financial years. Anything above that continues to count as theirs, as a "deprived asset", for 5 years from the date of the gift. If Rose gives her $100,000 inheritance to Mia, and has made no other gifts, $90,000 still counts against Rose for 5 years, even though she no longer has it.

Does inheriting or keeping a home affect the pension?

The home a pensioner lives in, and up to 2 hectares of land it sits on, is exempt from the assets test. A home they inherit but do not live in is not exempt and counts at its market value.

• Moving into care: if a pensioner leaves their home because of illness and enters care, the former home can be exempt for 2 years from the date they enter care. If their partner still lives there, it remains exempt.
• Selling the home: for sales from 1 January 2023, the part of the sale proceeds the pensioner intends to use for a new home can be exempt for up to 24 months.
• Homeowner status: homeowners and non-homeowners have different assets test thresholds, so changing homes, or living in a home under a will rather than owning it, can change the numbers.

How does a testamentary trust protect a beneficiary on a pension?

Instead of leaving the share outright, the will leaves it into a trust run by someone else, with the pensioner as a beneficiary. This is a testamentary trust. Centrelink generally counts a private trust's assets and income against the person who controls it, so the aim is that the pensioner does not control it and did not put the money in.

• Control test: control usually sits with the appointor, the person who can appoint and remove the trustee, or with the trustee if there is no appointor. Centrelink also looks at informal control: whether the trustee could reasonably be expected to follow the pensioner's directions or wishes, including through relatives and other associates.
• Source test: a trust can also be counted against a person who transferred their own assets into it. Where the money comes from the deceased's estate rather than the pensioner, this test is generally not the problem. It becomes one if the pensioner later adds their own money.
• Distributions: amounts the pensioner actually receives from the trust can count as their income.

Avoid an "elective" will where the pensioner chooses whether to take their share outright or through a trust. Their own choice can be treated as control or as a gift. Because Centrelink can look at relatives who would follow the pensioner's wishes, the choice of trustee matters.

What is a special disability trust?

A special disability trust is a Commonwealth-regulated trust for a person with a severe disability, and it can be created by a will. It gives the strongest Centrelink protection, but only for those who qualify.

• Eligibility: a person aged 16 or over generally needs an impairment level that would qualify them for the disability support pension, a disability that would qualify a carer for Carer Payment or Carer Allowance (or residence in a funded group home or similar), and no likelihood of working more than 7 hours a week at or above the relevant minimum wage. Different criteria apply under 16. Services Australia must assess the beneficiary as eligible.
• Assets test exemption: trust assets up to an indexed limit, $862,750 from 1 July 2026, are exempt from the beneficiary's assets test, plus a home the trust owns for the beneficiary to live in.
• Income: distributions from the trust are not counted as the beneficiary's income.
• Gifts from family: immediate family members who have reached pension age and receive a qualifying pension can give up to $500,000 combined to the trust without the gifting rules applying to them.
• Model deed: the trust must use the Commonwealth model trust deed clauses, keep annual financial statements and meet reporting rules.
• Permitted spending: mainly the beneficiary's care and accommodation needs arising from the disability, including medical and dental costs, approved therapy, aids and buying, renting or maintaining their home. A separate discretionary amount, $15,250 a financial year from 1 July 2026, can be spent on other things such as food, household items and recreation. The trust cannot pay immediate family members for care.

If Leo had a severe intellectual disability and received the disability support pension, his share could fund a special disability trust that buys a unit for him to live in and pays arm's-length carers, without reducing his pension. Full details are on the Services Australia special disability trusts page.

What if the beneficiary does not qualify for a special disability trust?

A protective trust suits a beneficiary who cannot safely manage money, for example because of addiction, gambling, mental illness or a risk of being pressured by others. There is no disability test. An independent trustee controls the money and pays the beneficiary's rent, bills and a modest allowance. Because the beneficiary does not control it, the trust's assets are generally not counted as theirs, though distributions they receive can count as income.

If eligibility is uncertain, a will can direct a share into a special disability trust if the beneficiary qualifies at the date of death, and into a protective trust if not.

How do you plan for a surviving spouse on a pension?

Everything to the surviving spouse is simple and gives them full control, but all of it counts against them except the home. If John dies at 70 and leaves Jane (68) $800,000 in shares outright, she could lose most or all of her Age Pension, depending on her other assets.

A trust for a surviving spouse is harder than for anyone else. For a testamentary trust, Centrelink counts the trust against the surviving partner if they control it, or if an associate of theirs controls it and they are a potential beneficiary. Associates can include relatives, so a trust run by Mia and Leo with Jane as a beneficiary may still be counted as Jane's. Whether a trust works for a spouse depends on who the trustee is and who the beneficiaries are, and it should be modelled before the will is signed.

For the home, the choice between a right to reside and a life interest matters:

• Right to reside: a personal right to live in the home. The spouse has a roof but no income or capital from it, and the right usually ends if they move out.
• Life interest: the use and income of the property for life. While the spouse lives there it is their principal home and exempt. A life interest left by a partner in a property they do not live in, or one they later give up, can be counted or treated as a gift.

Our life interest vs right to reside guide covers the drafting. Remember that a spouse left less than an outright share may bring a family provision claim, so the Centrelink saving has to be weighed against that risk.

What is our role?

We draft the will and the trust structure. The Centrelink impact should be modelled by a financial adviser or the Services Australia Financial Information Service before the will is signed. See our estate planning page for how we work and our fees, and our tax on inheritance guide for the tax side.

This article is general information only, current as at October 2026, and is not legal, financial or tax advice. Estate planning, tax and Centrelink rules change over time and their effect depends on your circumstances. You should obtain advice specific to your situation before acting.