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Estate Planning

Estate planning implications of TBC need attention

A specialist superannuation law firm has suggested SMSF advisers and their clients need to examine estate planning strategies in light of the transfer balance cap to be implemented on 1 July.

The concern Cooper Grace Ward Lawyers has expressed centres on compliance with the transfer balance cap whereby any amounts over the $1.6 million limit will most likely be transferred from pension phase back to accumulation phase.

“In working through the changes and their impact with clients, it is apparent that most estate plans now need some adjustment as we deal with the new measures, particularly where there is an SMSF,” Cooper Grace Ward tax partner Scott Hay-Bartlem said.

“For example, simply taking funds out of a reversionary pension back to accumulation phase to comply with the new transfer balance cap alters what happens when that member dies.

“While the remaining pension may continue with the same reversionary beneficiary (depending on the commutation process and documents used), the reversion will not apply to the amount in the accumulation account.

“This may mean further documents are required (such as a binding death benefit nomination or to pass control of the SMSF appropriately).”

In light of the new super rules Hay-Bartlem highlighted a few elements of an SMSF estate plan that needed immediate scrutiny.

The first of these is to make sure larger balances in the accumulation account of the fund as a result of a part commutation of a pension are taken into account in the estate plan.

Second, if superannuation benefits must exit the retirement saving system completely the estate plan must ensure the most efficient means of holding the assets and that they will be allocated properly upon the SMSF member’s death.

And finally to make sure that monies exiting the superannuation system are incorporated in the estate plan.

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