Are SMSF deeds and estate plans ready for the fast approaching superannuation changes?
You probably have heard about the 2016-17 Budget and related superannuation reforms due to apply from 1 July, 2017. However, you might not have thought about estate plans and trust deed updates. In order to ensure your clients are going to be prepared, you need to read on.
- For self-managed superannuation fund (SMSF) members, does their trust deed need to be reviewed or updated?; and
- Does the member’s estate plan need to be altered or reviewed in light of the changes?
- Ability to transfer between pension and accumulation accounts
- Adequate rules about contribution limits, the $1.6 million cap and the ability for the trustee to refuse contributions that exceed limits
- Ability for the trustee to cover any costs which may arise as a result of the changes
- Anti-detriment provisions may have to be removed; and
- Ability for members to claim any deductions or make carry-forward concessional super contributions that arise as part of the changes may have to
- A reversionary pension nomination will only cover the relevant pension amount. So, anyone with over $1.6 million in pension phase who was relying
on their pension nomination will have to put other measures in place for the excess. For example, a binding death benefit nomination may have
to be made if the excess is put into the accumulation account, or the member’s Will may have to be altered if the money is taken out of super
and not already covered by the existing Will.
- Particular care may have to be taken when passing control of any self-managed superannuation funds on death if a reversionary nomination no longer
covers the full superannuation balance.
- If the reversionary beneficiary and beneficiary/ies under the Will differ, then the Will may have to be changed. This is because the amount going
to the reversionary beneficiary may now be less than previously anticipated.
- Spouses with a combined benefit exceeding $1.6 million may have to reconsider their estate plan in light of having to eventually fall below the
- The Will may have to be changed simply due to an increase of assets in the estate or due to the different concession limits and tax outcomes –
the figures that the current estate plan was prepared upon may no longer apply.
The transfer balance cap also applies to balances which have arisen from a deceased family member. If a member effectively “inherits” a pension account
from their deceased spouse either as a reversionary beneficiary or by taking a death benefit as a pension, the deceased’s spouse’s balance is to
be added to the member’s for the purposes of the cap, and they have up to around 12 months (depending on the circumstances) to rectify the situation
so that they do not exceed the transfer balance cap.