Good Advice, Good Value, Good People

Archive for Estate Planning

Where Does Your SMSF Go When You Die?

Estate planning is not one of the more pleasant things to think about, but it can be comforting to know where your Self-Managed Superannuation Fund (SMSF) is going to go when you die. It can also be comforting to know that taxes won’t consume a large portion of their inheritance. Here are some of the fundamentals of where an SMSF goes when you die and how taxes are paid.

According to the Australian Securities and Investments Commission (ASIC), it is recommended to fill out the form which determines where your money is supposed to be distributed in case of your death. This can keep your family’s money from being “tied up” in their time of grief. (1)

Estate Planning For SMSF

If You Die, Who Gets Your Super?

In the case of your death, the trustee of your super pays the money, known as your “death benefit,” to your dependent, dependents or estate. Your dependents include your spouse or same sex de facto partner and your children. It can also include anyone with whom you were financially interdependent or anyone who was dependent upon you financially. (1)

Usually, your super fund will allow you to nominate, in a binding or non-binding fashion, the person or people to whom your death benefit will be paid. (1)

Binding Nomination

A binding nomination forces the trustee to pay the death benefit to the person or people you specified. You can choose whether the money be paid to one or more dependants or to your personal legal representative, who then pays it out according to your will. (1)

Non-Binding Nomination

A non-binding nomination is more of a guide to your trustee as to who gets your benefits. However, it is the trustee who makes the final decision. The trustee is not bound to follow the instructions you left in your will. If you nominate someone who is not a dependant, the trustee will still have the option to give your death benefits to dependants, instead. (1)

Factors for Taxing a Super Death Benefit

According to the Australian Taxation Office, taxation on super death benefits are dependent upon a number of factors: (2)

Whether the benefit is paid to a dependant or a non-dependant person. (2)

Whether the benefit is paid as a superannuation income stream or a lump sum. (2)

Whether the SMSF is tax-free or taxable and whether taxes were already paid on the taxable portion by the SMSF. (2)

The age of the SMSF owner when they died. (2)

The age of the person receiving the death benefit. (2)

Tax Implications

Dependants are not required to pay taxes on a lump sum benefit. If the benefit is paid as an income stream, taxes will be computed accordingly. If either the deceased or the beneficiary is more than 60 years old, the taxed element requires no payment. The untaxed element is paid at the beneficiary’s marginal tax rate with 10% subtracted as an offset. (2)

If neither the deceased nor the beneficiary is 60 years of age or older, the taxed element is taxed at marginal rate minus a 15% offset. The untaxed element is taxed at the marginal rate. (2)

Call Approved Financial Planners Today

At Approved Financial Planners, our estate planning advisers can help you make sense of an ever-growing web of regulations and paperwork. We have the know-how to help ensure that your SMSF is going where you want it to when you die.

Call us today: 08 6462 0888.

(1) Australian Securities and Investments Commission, MoneySmart, “Super Death Benefits,” https://www.moneysmart.gov.au/superannuation-and-retirement/how-super-works/insurance-through-super/super-death-benefits. 21 August 2015.
(2) Australian Taxation Office, “Superannuation Death Benefits,” https://www.ato.gov.au/Individuals/Deceased-estates/Superannuation-implications/. 4 June 2014.

Why It’s Never Too Early to Start Thinking about Estate Planning

Many Australians think “estate planning” means drawing up a will and forgetting about it. While the first step in estate planning is, indeed, to draw up a will, there are a lot more things you can do to ensure a smooth transition and allow your heirs to keep more of their money. While we aren’t allowed to give individual advice on our blog and all information must be general in nature, here are some of the strategies we have suggested to various clients in our Perth office.

Start Thinking about Estate Planning

The Will

At Approved Financial Planners, we don’t create wills. However, we do provide referrals to trusted members of the legal profession who are qualified to make sure your assets go to whom you want, while taking full advantage of tax effective and innovative strategies. The will is the linchpin of your succession strategy.

Transfer of Assets

Some clients choose to start transferring assets while they are still alive. This can often have tax advantages and can help your heirs utilise the assets at an earlier age. For example, passing on a business can allow the heirs to run it more successfully while allowing you to forget about it and enjoy retirement.

Vital Estate Planning Factors

It is important to know all of your assets when planning your estate. This can include personal assets and investment assets, such as discretionary trusts, investment companies and self managed superannuation funds (SMSF’s).

Another important consideration is minimising taxes. This can include the creation of investment vehicles that provide long-term tax efficiency.

Many families have at least one “special situation” such as divorce, disabled beneficiaries or minor beneficiaries. These assets are usually protected on an individual basis depending upon the situation. Future death benefits also require attention in many cases to make them tax effective.

Call Approved Financial Planners in Perth Today

If you would like specific information, call us today for a free consult: 08 6462 0888.

Why Superannuation Estate Planning is So Important

Estate planning is an important part of protecting your wealth and making sure that your surviving spouse and children have access to your superannuation fund. In Perth and beyond, it is reassuring to many to know that their families will be taken care of in the event of their death.

While the death benefit being paid to a surviving child under the age 18 or spouse can be tax-effective, there is more to superannuation estate planning. Vulnerable beneficiaries often need to be protected and funds need to be available to entities that are classified as “non-tax dependents.”*

Superannuation Estate Planning is So Important

What is a Testamentary Trust?

A testamentary trust is an arrangement or trust contained within a will and takes effect only after the person dies. It can be created using all or any part of the estate as assets. A will can contain many different testamentary trusts. A testamentary trust can allow for vulnerable beneficiaries to receive their funds while still preserving the tax efficiency for the spouse or children.*

What is a Testamentary Life Interest Trust?

A testamentary life interest trust is a trust that provides support to the named beneficiary for the rest of their life, starting immediately after the client’s death. If the beneficiary transcends the need for support, the money goes to other nominated beneficiaries directly. Life interest trusts do not allow the beneficiary to control the access to the funds that capitalise the trust.*

Benefits of a Testamentary Trust

Ideally, a testamentary trust is tax efficient. It also protects the assets of the trust while protecting the beneficiaries. It often provides the primary beneficiary with flexibility when trustees are allowed to decide when to release funds and how much to release.*

Call Approved Financial Planners Today

For estate planning, general financial planning or to learn more about how a testamentary trust might work for you, call our Perth office: 08 6462 0888 today.

*Financial Planning Magazine: “Essential Superannuation Estate Planning.”

Is it Time to Think about Estate Planning?

For most Perth financial planners, estate planning is a touchy subject. As with life insurance or disability insurance, nobody wants to think about the unthinkable happening to them. Most people see death as something that will happen “later” and disability as something that happens to someone else.

Sadly, the cold, hard fact is that a lot of people do die before they think they will and many become disabled due to accident or illness. When someone dies, his or her family is already filled with grief. The worst thing that could happen would be to compound that grief by not having made arrangements for your family to be able to access your assets in their time of grief and need.

What is Estate Planning?

A lot of people think estate planning is simply writing a will, but they are wrong. In fact, we recommend or refer the actual writing of the will to a legal professional who is qualified to do it. Legal professionals know more about the law and can help maximise your assets through innovative strategies that minimise the taxes that your beneficiaries will have to pay.

Estate Planning in Perth

The first step we take is to complete a thorough inventory of your assets. This not only includes your personal assets, but also assets held in discretionary trusts, investment companies, self-managed or retail superannuation funds and other investment vehicles.

Next, we take tax implications into consideration and create investment vehicles that are tax effective in the long term for your beneficiaries. We also take special family situations such as divorce, minor beneficiaries or disabled beneficiaries. Then, it is time to work in tandem with your selected legal professional to create enduring power of attorney, your will and binding death benefit nominations.

We also take future benefits into effect, such as lump sum death benefits, tax circumstances, asset protection and life interests or income streams based on dependent needs.

To learn more or for an individual consult, call Approved Financial Planners today: 08 6462 0888.