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Estate Planning

Planning vital for second death benefit

Advisers helping SMSF clients with estate planning must place greater importance on the second member’s death and where those benefits are expected to end up.

As death was the compulsory cashing requirement for superannuation, discussion and planning generally concentrated on the first SMSF member passing away, Miller Super Solutions founder Tim Miller said.

“Now we don’t obviously strive for death, but it’s the only time that money has to actually be paid out of the superannuation system,” Miller told the Super Reforms Masterclass recently held in Sydney.

“So we should be trying to maximise the benefits for whoever is going to receive it when we die.

“But what we have to make sure is that we have a plan for the second death benefit.

“When we do estate planning, it’s not about who dies first; it’s about who dies second and who their benefit is going to.”

He added that whether the client had a discretionary pension or a reversionary pension, most advisers generally assumed the money was going from one spouse to the other, which was the case for 70 per cent of SMSFs.

“Here, a re-contribution strategy has a huge amount of legs with regards to the majority of superannuation interests out there,” he said.

“We’re not going to trigger our caps and we’re going to save tax because nothing’s been done in regards to the end benefit, which is the death benefit being paid out to the adult children.

“So we certainly need to make sure that our re-contribution strategy is considered, especially with the secondary death benefit.”

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