Estate planning with superannuation

Such a difficult one as it depends on both the circumstances and attitude.

First, I am single, have no one financially dependant on me and I was in a single member SMSF.

Also, as I have mentioned or implied previously I was tiring of dealing with superannuation. It was becoming a mental drag dealing with it. That was one factor.

I discussed the surgery extensively with the treating specialists and the GP. The risks were also discussed and in my case it was not a 2% v 98% ratio but higher than that. Keep in mind I had confidence in the surgeons.

However, I sat and thought about it from the perspective of "If things do go pear shaped, what did I want for my Executor/beneficiaries?" Fundamentally, the answer was as far as possible ease of administration of my Estate. It was also in the back of my mind that not everyone wants to deal with deceased estates. I've had to deal with more than one and found it time consuming, stressful and a right proper pain.

My Will establishes a Discretionary TT. That's enough to deal with as far as I am concerned and the impost of dealing with superannuation would be, in my view, a further burden. That includes industry funds as they have the ability to stuff beneficiaries around with the best of them. In addition, winding up the superannuation fund literally saves my beneficiaries thousands in tax.

So, off-market transfers of the funds holdings to my personal name were arranged (which were all actioned on that day at zero fee) with sufficient cash left to cover accounting/ASIC fees and tax. I am not the slightest bit concerned about paying tax on my personal investment income so that was not a consideration for me.

These matters and more were discussed from a personal aspect with the FP/Accounting firm I use.

It wasn't a simple decision by any means as there is more to it than that but that was the basics.

Of course, those with legal/accounting qualifications may see things differently. And fair enough that is their training. Even those without such training will have their own views. Also fair enough but, hey, IDGAS IAAM.

By the way, it was fascinating exercise to consider one's potential demise and plan for that possibility.

Apologies for the ramble. It certainly does not provide a definitive answer as there are many facets involved.

 

Thanks SK. Makes sense now given the circumstances.

 

That's a worry of itself.

I hope I didn't give people the impression I am morbidly obsessed. I was very optimistic about the outcome. However, there are always a possibilities in these matters which need to be considered, especially if you care about your beneficiaries. Heck, that's really why you have a Will if you think about it enough.

I now have a Director ID for hire, so any executor of a deceased estate involving an SMSF who doesn't want to go down the path of applying for a Director ID, get in touch.

 

That's a good point. Planning for the worst and hoping for the best have been with me for ages, serving me well in market downturns, locking myself out of the house, deleting a file that I meant to keep (the backup copy was used), and more. I have a Will and Enduring Powers of Attorney.

 

Super and impacts of death are a topic that Australia needs to discuss a lot more.

I am willing to bet the vast majority of Australians have no understanding of A: tax implications of super when someone dies, and B: who an industry super fund would determine a "dependent".

Not sure how to achieve this increased awareness, but a good start would be for the elderly to view leaving their wealth and assets in super as an admin burden for their dependents and is what I would happily call "financial hoarding". Yes, you're leaving money, but you're also being a pain in the ass for not dispursing your funds early when your dependents need the funds more and removing the ability for dependents to bicker and fight about your will.

This obviously isn't a factor if there are unexpected deaths, that I understand. But someone sitting in a retirement home for 10 years who can't travel and has more money than they could possibly need should really consider the impact of being lazy about finances pre-death.

 

Leaving substantial wealth to your beneficiaries after death is not being a pain in the ass; not engaging with your beneficiaries and having a proper estate plan in place is being a pain in the ass - a big difference.

Depending on the situation superannuation can be a lot easier to deal with than leaving funds as estate assets, what's important is to ensure that it's looked at as part of a comprehensive estate plan and not just ignored.

The amount of people I come across that don't know what nominations they have made for their superannuation or have any idea whether their nominations are even valid is astounding.

 

I think it's very important to have these conversations for everyone - even before you reach a point where there is a significant life event changes your outlook.

It's such a sensitive subject that a lot of people shy away from it because it can be very confronting, but if you don't put a plan in place it can sometimes be too late to address when it is needed.

 

Super funds can be a pain though. I've come across one this week where the fund wants death certificates for the deceased's daughter and the former wife (or, if she's not deceased they want divorce orders, but they were not legally married), contact details for the former wife's family; and details of the current 'lady friend' (who didn't live with the deceased) including a stat dec from someone unrelated to either of them confirming whether or not there was a domestic relationship or ongoing financial support.

The surviving child (who is the executor & sole beneficiary) has none of this info and has been told they can't do the stat dec, but they have no knowledge of any other person who can do this. The fund won't pay to the Estate unless they have all of the requested information.

The deceased didn't have a BDBN.

 

No you didn't. It was just a ripping good post of your actual experience. Money can't buy this sort of firsthand experiences that people share. Thankyou.

 

That last line is kind of the problem.

If people don't have a valid binding nomination it is a nightmare because you are dealing with trustee discretion, information gathering, potential conflicts and the fallout from combining all of these if there are disputes.

Contrast that to having a valid binding nomination in place or if a pension is reversionary and it is quite a simple process by comparison.

 

Agree with your points Andrew, Super with the right paperwork is a great outcome.

I'll rephrase my rant: people who are jusy hoping the default super system(without correct paperwork) or their will sorts it out for them post death are either willfully ignorant or uninformed. I don't blame anyone who assumes the super system post death is better than it actually is.

Would personally love to see coherent individuals just divvy up their assets as they see fit while still alive (to share in the joy of that outcome with them).

 

Most people assume things.

Divvy up assets while alive ? Then you wont have an estate. I would argue thats harder than it sounds. eg Selling or giving away your home while living there ? Dying with super ? An estate plan seeks to plan this same matter without actual disposal etc. Far more practical. Esp if you dont know when you may die. Could create all sorts of issues if you give all away and haveno way to live, eat and receive care. Estate plans do this if its correct and up to date.

eg How would a couple do that ? Do they assume they both die or one gives to the other to find the other then dies.

 

For the heck of it, throw in the matter of organ donation. I'm a registered organ donor and there is a clause in my Will in that regard - I hope my liver has recovered from my days of drinking! It was one of the issues I discussed with my brood while preparing the Will. I think some people get squeamish about the subject.

They were also involved in my decision making process regarding superannuation.

 

I've been to a few seminars in the past year where the presenters have suggested that having a BDBN is unnecessarily restrictive, and it's better to be flexible. The supposed logic being - what if the beneficiary is likely to become bankrupt/falls into a family law scenario etc etc.

I'm not really convinced.

 

Great. So now the member is expected to have the ability to predict the future.

Anyway, the nomination only comes into effect on death so it's not going to be the deceased's problem. It can be changed while your alive if circumstances change and those changes are a worry.

 

Wouldnt you set the estate as the beneficiary in the bdbn, so that it can pass through the estate and into a testamentary trust?

 

That is assuming there is a Will. I have come across a few in their late 50's, early 60's and members of the public service CSS. No Will and hadn't even given it a passing thought.

Then there is the matter of younger people. There was that case of a young lass who wanted her money to go to her Mum & Dad but the Trustee determined her abusive boyfriend was a de-facto and he got it all. Such is the law.

 

I'm going to throw this out so others may have a think about it.

Your children. In the workforce and have superannuation although not a great amount say $50k or so. It is possible they may not have a spare few thousand floating about in order to have a properly drafted Will prepared.

Offer to pay for it if you are in a financial position to do so. Usual stuff of BDBN & Legal Personal Representative issues. Won't stop some parasite trying to challenge things though.

 

Teach them to avoid parasites? You managed to.

 

Up until this evening at least. A Browning 12-guage can be Dad's best friend.