Death is something that most of us naturally try to ignore. Unfortunately, this often means that we leave our loved ones with a mess to tidy up, or even a nasty tax bill. However, with a little planning this need not be the case.

The bad news for those who have already done this planning is that the super changes that took place on 1 July 2017 may have upset those plans. One major change to super was the Transfer Balance Cap. This measure restricts the amount that can be put into retirement income streams (such as account-based pensions) to $1.6 million per person.

For couples where neither member has $1.6 million, it would appear that this change would have no impact. This is not the case however, as receiving a pension income stream following the death of a spouse counts towards this $1.6 million cap. Therefore, any couple with a combined amount of more than $1.6m in super would be impacted.

A challenge for all ages

Unfortunately, this issue has a much broader impact than just older people with a good level of savings. Life insurance is often held through super, which can result in a deceased person having considerable super benefits. This is equally a problem for the young professional with two dependent kids, as it is for the retired couple with super over $1.6 million.

If part of your Estate plan involves the payment of benefits out of superannuation, you will need to review it. In particular, it affects strategies where someone receives those benefits as a pension. This is because the total pensions someone may receive over their life are now
limited. The impact of this could be that money may be forced to be paid out of superannuation, when this was not intended. It could potentially leave a young parent with a reduced ability to manage their own eventual retirement, due to a death benefit income stream paid to them.

Therefore, it’s essential that couples review their plans. In doing this, it’s important to remember that super cannot be controlled by your Will. Money in super is held in trust, and therefore not automatically part of your Estate upon death. So you will need to consider your super specifically.

Important issues to think about

  • Who should my super be paid to? It can only be your spouse, your kids, financial dependents and your Estate
  • Do I want my wishes to be locked in via a Binding Death Nomination, or do I want to allow my beneficiaries some flexibility?
  • Should I ensure my benefit is paid as a pension, a lump sum or a combination?
  • Should my life insurance be owned by my super fund, owned personally, or owned some other way?

While specific Estate advice is the domain of lawyers, at Elston we can assist you with this process. Your adviser can guide you through the options for your super and insurance, and work with your solicitor to ensure you have a robust plan in place. A plan, that won’t leave your family with any nasty surprises.

If you would like more information please call 1300 ELSTON or email info@elston.com.au and an adviser will be in touch.