03 April 2017

With the start date for the 2016 Budget changes to super almost upon us, have you turned your mind to the estate planning consequences of the actions you are about to take?

While much has been written about transfer balance caps and accounts, reducing pension balances, and CGT relief, responding to the changes also has some fundamental estate planning consequences.

In working through the changes and their impact with clients, it is apparent that most estate plans now need some adjustment as we deal with the new measures, particularly where there is a self-managed superannuation fund (SMSF). For example, simply taking funds out of a reversionary pension back to accumulation phase to comply with the new transfer balance cap alters what happens when that member dies. While the remaining pension may continue with the same reversionary beneficiary (depending on the commutation process and documents used), the reversion will not apply to the amount in the accumulation account. This may mean further documents are required (such as a binding death benefit nomination or to pass control of the SMSF appropriately).

Have you considered the following?:

  1. Commuting part of a pension back to accumulation phase creates or increases an accumulation account. This means an additional or bigger accumulation account must be dealt with as part of the member’s estate plan.
  2. If money has been withdrawn from the superannuation system (either because an amount will not stay in pension phase or because a death benefit must be commuted to a lump sum), how are those assets now held and will they properly been passed on the death of the member?
  3. On the death of a member, will funds be forced to leave the superannuation system, and has this been considered as part of the estate plan?

Anyone with funds in superannuation, particularly SMSFs, should be reviewing their estate planning now to ensure their estate plan:

  • is not adversely impacted by the new rules or the steps they take to comply with the new rules; and
  • still achieves their estate planning goals after 1 July.

If you have any questions, please contact a member of our team.

 

This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please let us know.