SMSF admin firm points to death benefit rollover trap
While the ability to roll over a death benefit without losing its death benefit status is a useful strategy that has resulted from the super reforms, some trust deeds do not allow this to occur, one SMSF administration firm has cautioned.
Heffron SMSF Solutions head of customer Meg Heffron says one of the opportunities with the new rules is being able to roll over a death benefit without changing its status as a death benefit.
“Although it will still have to be converted to a pension or cashed out as a lump sum in the new fund,” she told SMSF Adviser.
In two-member SMSFs, it is not uncommon for a member to want to wind up the fund after the other member, who was perhaps the driving force behind the SMSF, dies, Ms Heffron said.
She said the new rules will make it easy for the remaining spouse to wind up an SMSF quickly but retain the money in a super pension in an industry or retail super fund.
However, some trust deeds do not allow for this.
“It was never an issue before, so people didn’t need to worry about it because you couldn’t do it anyway,” Ms Heffron said.
“This is probably a classic case of where there’s nothing wrong with the old trust deed, you can keep it and you wouldn’t have a compliance problem, but you might just find there are some opportunities you unable to take advantage of.”
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.