We have had a busy period dealing with the changes to superannuation that have applied from 1 July 2017. The Budget made changes to pensions, commuting pensions, withdrawing money from superannuation and updates to trust deeds. All of these changes can have quite significant implications on the effectiveness of a member’s existing estate plan.
Now it is critical to identify clients who need to review their estate planning following these changes.
What are some indicators that your clients need to review their estate plan?
1. They have more than $1.6 million in superannuation
If your client has more than $1.6 million in superannuation, some funds may have to leave the superannuation fund after their death, which may not have been the case before the Budget changes.
How should these be dealt with? Are they covered by a binding death benefit nomination and should they be? Should the Will include a testamentary trust for the excess funds that are required to leave the superannuation fund?
Your client may now have an accumulation account (when they were previously all in pension phase) so there is an additional account to be considered, which may not be covered properly by existing estate planning arrangements.
2. Together with their spouse, they have more than $1.6 million in superannuation (combined)
Because of the transfer balance cap, some funds may have to leave the superannuation fund on the death of one spouse or alternative strategies considered.
3. They withdrew money from superannuation to comply with the transfer balance cap
This means that they will now have additional assets to deal with in their estate planning outside superannuation. This may form part of their estate or may be in another structure (such as a family trust or company), which involves more considerations for their estate planning.
4. They have a reversionary pension in place
If your client has a reversionary pension in place, it should be reviewed to ensure that it is properly reversionary and appropriate in their circumstances.
We have seen pensions that are supposed to be reversionary and aren’t properly documented. We have also seen reversionary pensions in place when the client intends their superannuation to be paid to their estate or a different beneficiary.
In addition, many clients cannot find all of the necessary paperwork to prove the pension continues to the nominated person.
5. They have young or disabled children
Should child pensions be considered? Following the introduction of the transfer balance cap to the Budget, child pensions are a more attractive option in many situations.
6. Clients have updated their trust deed
Many SMSF trust deeds have been updated to deal with the Budget changes.
As a result, different provisions in the SMSF trust deed will apply on the death of the member. Estate plans should be reviewed to ensure the new deed and the existing estate planning documents will provide the intended result.
If you have clients who need to review their estate planning, please contact us. We have a team of highly experienced estate planning lawyers who provide practical solutions and advice. We also offer a fixed fee estate planning review package. For more information, please click here.