A sector expert has drawn attention to the importance of stopping any automatic pension payment set up in an SMSF when the income stream recipient passes away due to the treatment these amounts will receive from the ATO.
“Any payments made after death are going to be considered a death benefit payment unless [the income stream involved] is a reversionary pension,” Accurium specialist adviser Natalie Scott told attendees of the latest Accurium technical webinar.
“That could cause an issue if we are then looking at paying a death benefit lump sum [as these amounts will be treated as lump sums and] there is a limit on how many death benefit lump sums you can pay.”
To this end, Superannuation Industry (Supervision) Regulation 6.21 stipulates a maximum of two death benefit lump sum payments can be made when an SMSF member passes away.
“So just keep that in mind. Talk to the client and see if they had a monthly direct debit coming out [of the fund to service a pension because] you’ll need to stop that,” Scott said.
She also took the opportunity to remind practitioners to confirm the role of any individual they may be dealing with in the event of an SMSF member’s death.
“Do make sure you are dealing with the person who will be stepping in as the trustee or is the remaining trustee [of the fund] and that they are following the rules of the deed and any requirements in relation to legal personal representatives that needed to be added in, and who the executor of the estate is and if they needed to be added in [as part of the process] as well,” she suggested.
“[This is] because in some cases you might find that you’re dealing with somebody, [for example], who you thought was the executor of the estate and they might not actually [hold that responsibility].
“So one of the [deceased member’s] kids might not be the executor, but they might have decided to contact you.”
She recommended practitioners refer to the relevant documentation to confirm who has the authority to act when an SMSF member dies.
