PwC director of private clients Liz Westover says following the introduction of the superannuation legislation, SMSF practitioners will need to look at every client to assess how these measures will affect them.
“No client strategy can be assumed to be appropriate or compliant,” Ms Westover told SMSF Adviser.
The provisions around estate planning and their impact will require a lot of attention by SMSF practitioners in particular, she said.
“A lot of people have done estate planning and made decisions around reversionary streams, and they may no longer be appropriate,” Ms Westover said.
“In fact, there may be some difficulties by assuming that everything is in order or that current plans continue to remain appropriate.”
SMSF practitioners, in particular, need to ensure their clients have made provisions for children from money outside of superannuation.
“The technicality around that is that children are going to be subjected to the $1.6 million cap as well, not for the rest of their lives but during the term of that child death benefit income stream,” Ms Westover said.
“If you have four children, for example, it may have to be split four ways so it’s only $400,000 per child for a very long time.”
If an SMSF trustee has a balance above $1.6 million, the money has to come out of super so they might need to make provisions outside of the super regime for benefits that are going to come out of super, she said.
“Unfortunately, if I’ve got $2 million sitting in super at the moment and I’ve got two kids, the cap becomes $800,000 each. So I’ve got $400,000 that can no longer sit in my super, it’s got to come out of the super system and be dealt with for my children outside of super, so that might be through a testamentary trust or some other provisions.
“People have to start being more aware of what’s going to happen in the event of their death, and it can no longer be assumed that it can just continue to be paid as an income stream out of super. Some monies are going to have to come out of super and be dealt with in other ways.”