Estate Planning & Superannuation

Transcription

1 Estate Planning & Superannuation An Executive Summary Luke Atkins Manager, SMSF Consultants Pty Ltd

2 Question What s your idea of superannuation?

3 Answer Q) What s your idea of superannuation? Designed for your retirement however through the correct structuring you can benefit TODAY! Help build assets TODAY! Help your family TODAY!

4 Question When you die, who thinks your Will deals with how your super is to be paid?

5 Answer Q) When you die, who thinks your Will deals with how your super is to be paid? Your Will is governed by State law while super is governed by Federal law (SIS Act) SIS Act has precedence

6 Question Who can receive your super on your death?

7 Answer Q) Who can receive your super on your death? Influenced by SIS Act who can receive benefits LPR or one or more dependants Dependants spouse (de facto), any child of the deceased or any person in an interdependency relationship Tax Act how benefits are taxed Super fund trust deed SMSF Will

8 Question Will your beneficiaries be liable for tax on receipt of your super?

9 Answer Q) Will your beneficiaries be liable for tax on receipt of your super? Depends on who receives your super If death benefits dependant No If non death benefits dependant Yes

10 Who is a death benefits dependant Deceased person s spouse / former spouse Any child of the deceased aged less than 18 Any person with whom the deceased had an interdependency relationship eg sisters living together

11 Who is a death benefits dependant cont Any person who was financially dependant on the deceased just before death Malek s case Faull s case Noel v Cook APRA guidelines

12 Question How are your super benefits taxed on your death?

13 Answer Q) How are your super benefits taxed on your death? Lump sums Paid to a death benefits dependant nil Paid to a non death benefits dependant Tax free component nil Taxable component 16.5%

14 Answer cont Q) How are your super benefits taxed on your death? Pensions Tax free component nil Taxable component depends on age of deceased / beneficiary Both >60 nil One >60 nil Both <60 marginal rate + 15% rebate

15 Question Is there a way to reduce this horrible death tax?

16 Answer Q) Is there a way to reduce this horrible death tax? Of course! Re-contribution strategy Withdraw money before you die!

17 Question If your Will doesn t deal with what happens to your super on death, what happens to your super when you die?

18 Answer If your Will doesn t deal with what happens to your super on death, what happens to your super when you die? Depends on the documentation inside the super fund 1. Nothing: trustee discretion 2. Non-binding: provides trustee with a guide with whom to pay your benefits & in what form trustee not obliged to follow 3. Reversionary pension: pension continues as if member was still alive determined when pension commenced

19 Answer cont If your Will doesn t deal with what happens to your super on death, what happens to your super when you die? 4. Binding nomination: if valid, results in trustee being obliged to follow the instructions 5. SMSF Will / Death Benefit Rule: binding directions which forms part of the governing rules of the fund

20 Getting it wrong Katz v Grossman Mr & Mrs Katz had an SMSF When Mrs Katz passed away Linda Grossman (daughter) appointed trustee Mr Katz put in place a non-binding nomination Benefits to be paid equally to Linda & Daniel Katz (son) Mr Katz s Will stated 50/50 split between Linda & Daniel for nonsuper assets

21 Getting it wrong cont Katz v Grossman Mr Katz assed away Sept 2003 Dec 2003 Linda appointed her husband Peter as additional trustee As nomination was non-binding, trustees refused to follow instructions & paid entire balance to Linda - $1m Daniel challenged the appointment of Linda & Peter as trustees

22 Getting it wrong cont Katz v Grossman Court decided against Daniel resulting in him receiving none of his father s super benefits As the Will provided 50/50 split of non super assets, Linda received 50% of the non super assets Estate had to pay costs - $90k

23 Getting it right SMSF Will a Will within your super fund All the flexibility of your personal Will Beneficial when planning for blended families spouse receives a life interest to income while capital maintained for the deceased children A must for everyone with superannuation!

24 SMSF Will case study Husband Age 68 Second marriage 4 children from 1 st marriage Only member of SMSF approx value $1.5m Receiving Account Based Pension

25 SMSF Will case study cont Wife Age 49 First marriage No children Owns matrimonial home $500k debt Salary approx $200k

26 SMSF Will case study cont Wife receives life interest to income tax free as husband >60 Children receive capital when dad & wife have both died If children predecease father / wife their portion goes to their Estate Any new members of the super fund have to be from the fathers bloodline

27 Summary 1. Establish dependency & complete Dependency Declaration 2. Reduce tax your adult children may have to pay on your death Re-contribution strategy (if possible) Dependency Declaration to assist 3. Complete SMSF Will to ensure your super ends up exactly where you want it on your death

28 What Next Prepare an SMSF Will Establish dependency Commence a re-contribution strategy (if possible) Book an appointment with me enjoy the Christmas period knowing you are looked after your family!

29 Further Details Luke Atkins The Stables 77 Willarong Rd, Caringbah Ph: (02) Presented 6/12/2012