Q: I am 87 years old and my wife is 81. We receive a part pension as we jointly own shares which supplement our pension with dividends and franking credit refunds.
My wife and I have both left our assets to each other in our respective wills. I’m concerned that when I pass away my wife will not be able to receive a part pension due to her being above the asset test if she inherits my half of our jointly held shares.
Is it possible for me to leave my half of our shares to one of our children? Therefore, the shares would be held jointly in the names of my wife and our son upon my death.
What will happen with the payment of dividends?
A: When you buy an asset with another person, the asset is considered to have been bought either as “Joint Tenants” or “Tenants in Common”. You as the owners make the election at the time of purchase. I would assume your share ownership has defaulted to “Joint ownership”.
In the event of the death of a “Joint Tenant”, ownership will pass to the surviving owner without the asset forming part of the deceased’s estate.
When assets are transferred on the death of a joint owner, they become assessable for Asset Test purposes by Centrelink for the surviving spouse.
For property owned as “Tenants in Common”, the deceased owner’s interest in the asset forms part of their estate and is dealt with in accordance with the terms of the deceased’s Will.
If the shares owned as “Tenants in Common” are not left to the surviving spouse, then these shares would not count for Asset Test purposes for the surviving spouse.
Where assets are held as tenants in common, you can hold assets jointly with an unequal interest, however, you would need to ensure that you have documented the ownership and declared income distributions in your tax returns to accurately reflect appropriate percentage ownership.
You will need to contact the various share registries to confirm the share ownership as “Tenants in common”.
As ownership of the shares currently resides jointly with you and your wife, all dividends would continue to be paid to you and be assessed for tax purposes in the proportion of ownership. Following your death, these payments would continue to your spouse.
Under “Tenants in Common” ownership, on the death of either you or your wife, ownership and rights to the dividends would transfer to whoever is specified as the beneficiary in accordance with the Will of the deceased.
If you believe that the surviving spouse would lose the Age Pension due to the Asset test, ensuring joint ownership of shares are held as “Tenants in common” with the assets passing to your children on death would be a strategy that can offset the impact of the Asset Test.