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SUPERANNUATION & ESTATE PLANNING - WHAT YOU NEED TO KNOW

Thu, 11 Aug 2016

SUPERANNUATION & ESTATE PLANNING - WHAT YOU NEED TO KNOW

Sitting down with your solicitor for an estate planning consultation is an important task that many of us put off due to time constraints. We understand that discussing your wishes after your death is an uncomfortable and sometimes unpleasant task, however, it is also one of the most important tasks you will undertake in your lifetime.

Having an up to date will and other documentation in place in the unfortunate event of your passing can assist your family and loved ones in an often traumatic time, providing them with a roadmap of your intentions, which can relieve any stress and anxiety and enable your wishes to be carried out promptly and efficiently.

An important consideration when contemplating your assets in the event of your passing is your superannuation.  It is becoming more and more common that superannuation benefits are one of the largest assets you may hold at the time of your death, and it is worth noting that your Will can not specifically cover your superannuation.  Accordingly, your superannuation benefits must be dealt with separately to ensure that your benefit is paid to your nominated beneficiary.

The Superannuation Industry (Supervision) Regulations 1993 (‘SIS’) stipulate that the death of a member is a compulsory cashing condition, which means that the benefit must be paid out upon the death of a member.  Accordingly, it is vitally important that measures are put into place beforehand to ensure that the benefit is paid out as you intended.

There are three main avenues whereby superannuation benefits are paid after a member’s death, each of which will be very briefly discussed below.  This area is significantly complex, and accordingly we recommend that you contact our office to discuss your superannuation and estate planning needs in detail.

First, the trustee of the super fund usually has a wide discretion in accordance with the relevant trust deed for the fund.  Initially, the trustee can pay the benefit to a ‘dependant’ or to the personal legal representative.  Of course, the beneficiary must then fit within the regulations requirements of what is deemed to be a ‘dependant’ to be considered, and in accordance with Section 10 of the SIS this includes (but is not limited to):

(a)   The deceased’s spouse;

(b)   The deceased’s children;

(c)    People who are, at the date of deceased’s death:

       (i)                  Actually financially dependant on the deceased; and

      (ii)                In an interdependency relationship with the deceased.

If the personal legal representative receives the benefit, then the funds will be dealt with in accordance with the Will and the beneficiary does not have to fit within the definition of a ‘dependant’.

There are cases wherein it may be a problem when the trustee is afforded the discretion to determine the disbursement of the benefit after a member’s death, and therefore the trustee’s discretion should be removed.

This is generally the case where there will be a lack of control in relation to the decision making process of the trustee, there is a large extended family and the member wishes to nominate specific family members to receive the benefit, or there is no suitable person to make the decision in relation to the death benefit.

Of course, there are significant risks in removing the discretion of the trustee, namely that there is a loss of flexibility in paying the benefit to the most appropriate person at the time of the members death, however this risk would need to be weighed against the benefit of having a fixed course of action.

If a member chooses to remove the discretion of the trustee, then this can be done in a variety of ways, the most common being a binding death benefit nomination, which stipulates the person whom the member nominates to receive the benefit upon their passing.  These nominations must be made in an approved form, and must be done strictly in accordance with the SIS and trust deed requirements, failing which they may be subject to challenge.

Finally, as alluded to earlier, the trustee of the fund can be directed to disburse the benefit to the legal personal representative to be dealt with in accordance with the Will.

If this course is chosen, then there are no restrictions on the beneficiary who can receive the benefit, however it should be noted that there can be a variety of tax consequences associated with payment of the benefit which should be carefully considered.

Superannuation death benefits and the taxation of same is a complex area which is dependent on a variety of issues and would need to be carefully considered for each particular circumstance.

In any event, it is important that the Will is drafted correctly, and encompasses specific clauses to ensure that any superannuation benefits received into the estate are dealt with appropriately.

Our Wills and Estate Planning Lawyers at Affinity Lawyers at Runaway Bay are well placed to provide you with practical and experienced legal advice in relation to your estate planning needs.  Please contact our office on 07 5563 8970 to arrange your estate planning consultation today.

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Tags: Will; Wills And Estate Planning; Estate Planning; Gold Coast Lawyer; Estate Lawyer; Asset Protection; Building Wealth; Tax Minimisation; Life Estate; Superannuation Structure; Power Of Attorney; Enduring Power Of Attorney; Estate Lawyer Gold Coast; Legal Will; Advanced Health Directive; Testamentary Trust; Beneficiary; Executor


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