Financial Planning, Retirement

Advisers must provide specialist death benefits advice

SMSF death benefits advice

An SMSF strategist has said the super reforms mean advisers need to provide better death benefits advice for clients upon the death of a member.

Financial advisers need to provide better services around their clients’ final years, including a consideration of death benefits, to improve their SMSF advice proposition, an expert strategist has said.

Speaking at Class Connect 2019 in Sydney today, I love SMSF director Grant Abbott told delegates the super reforms and the restrictions imposed by the transfer balance cap rules mean better advice services were needed to determine what happens to death benefits when a member dies in pension phase.

“Three hundred billion dollars is going to be passed out [of super] in death benefits over the next 15 years so we all need to become SMSF estate planning geniuses,” Abbott said.

To this end, he revealed he did not favour the use of binding death benefit nominations for estate planning purposes, citing recent legal challenges regarding death benefits involving these arrangements as evidence to support his position.

He said auto-reversionary pensions and binding death benefit directions were provisions that were more effective when a member passes away.

Advisers should also start exploring strategies that will preserve a decent standard of living and some dignity in the event of a client’s incapacity, he said.

“We’re starting to see the implementation of binding living directions. Essentially this measure gives us a position where if someone has lost their mental capacity, their enduring powers of attorney come in and they’re locked and loaded as to the quality of care and service that is being provided for them,” he said.

Binding living directions can ensure the SMSF member will be able to reside in an aged-care facility of their choosing and will effectively avoid the situation where the member’s children may arrange for accommodation of a lesser standard to save money, he noted.

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