The trustee services provider’s national manager of estate planning, Anna Hacker, told SMSF Adviser that she had seen rising interest among SMSF professionals in the trusts as a way to work around the impact of the transfer balance cap rules on death benefits.
“The super benefit trusts probably haven’t been as attractive as they are now, but they’ve always been around,” Ms Hacker said.
“Where there is a spouse or dependant children, we can put a trust in place so they can take the benefit out of super and put it into a trust that can almost be like its own pension, but because it’s not in super, you wouldn’t have that [transfer balance] limit.”
Ms Hacker said setting up a death benefit trust as part of a trustee’s broader estate plan also gave estate executors more options to deal with future changes to super rules.
“It’s up to the executor if they want to use it at the time — the super may have gone as a pension or a death benefit payment, but the more flexibility you have for the executor to think about it in terms of the estate and who the tax dependants are, the better,” she said.
“There’s all sorts of things you can do in a will itself — you don’t have to decide what you want to do at the time, but you need to give the executor flexibility, because if the rules change again suddenly, all the plans we might have made in the past have changed, and if you send the super in one direction, it might not be of as much benefit.”
However, SMSF professionals needed to be aware of the limitations of such a trust, which would only be of benefit to the deceased’s dependants and couldn’t be created after the trustee’s death.
“The only beneficiaries are people who are tax dependants, so the way it’s treated is it would be paid out as a benefit to tax beneficiaries, and so long as you’re within the guidelines, it is going to be tax-free,” Ms Hacker said.
“It has to specifically be super death benefits that are coming through to the trust and it needs to be set up in the will, so it can’t be created after someone has passed.
“You need to make sure it is carefully drafted, so it’s not the most flexible discretionary trust in the world, but it’s created some great outcomes for clients, and people are definitely more interested in it now given all the changes to super that have taken place.”
