Estate Planning

Estates unlock dependency tax benefits

estate tax benefits

SMSF members should examine the tax benefits of nominating their estate as the beneficiary of a super death benefit if they want it to go outside the family

Members looking to nominate someone other than an immediate family member as a beneficiary should consider nominating their estate as a death beneficiary to ensure they can secure available tax benefits, an SMSF legal expert has said.

Law firm Abbott & Mourly national practice director Tony Anamourlis said SMSF members should keep in mind the tax benefits of nominating an estate as the beneficiary of their superannuation death benefit when looking to provide for a beneficiary other than their spouse or child, as long as it could also be established the person was a financial dependant.

“If it can be established that a person was financially dependent on the deceased, strategic opportunities arise. These opportunities can also lead to tax efficiency,” Anamourlis said during the LightYear Docs 2021 Virtual Strategy Summit today.

Anamourlis pointed out members wishing to nominate a financially dependent beneficiary other than a spouse or a child could nominate their estate as a beneficiary of their death benefit proceeds and make a gift to their preferred beneficiary via their will, instead of leaving them with the tax implications of being a direct beneficiary of the death benefit.

“Where the superannuation death benefit payment is made to the trustee of the estate, the benefit is taxed in the same way it would have been taxed if the payment would have been [made] directly to the end beneficiary,” he noted.

“The commissioner will determine, ultimately, whether any gift or a death benefit via a will is [made to] a dependant.”

For members with concerns their will might be contested after their death, he recommended they keep a written statement of their reasons for excluding someone’s entitlement. He also warned the statement would not be binding.

“It’s important to note that the statement is always challengeable,” he said.

In March, Cooper Partners financial services director and head of SMSF and succession Jemma Sanderson suggested SMSF trustees who had remarried and might be facing estate planning issues between their new partner and their adult children should consider the use of two super funds to separate the benefits that were earmarked for the different parties.

Earlier this year, CBA Commonwealth Private Office strategic advice specialist Caroline Harley said financial advisers should give great consideration to language and not just figures when providing items such as estate planning strategies for their SMSF clients.

Copyright © SMS Magazine 2024

ABN 43 564 725 109

Benchmark Media

Site design Red Cloud Digital