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Estate planning may be ‘radically different’ beyond July

Jotham Lian
12 April 2017 — 1 minute read

SMSF trustees have to consider fundamental estate planning consequences ahead of the 1 July changes, with many professionals and trustees not entirely aware of the knock-on effects of these sweeping reforms. 

Cooper Grace Ward tax partner Scott Hay-Bartlem says trustees should be aware of how changes they make to comply with the new superannuation measures will inadvertently affect their estate plans.

“SMSFs will look different and will have different accounts. Where they once could have had just a pension, now [they] will have a pension account and accumulation account or will have two pensions and two accumulation accounts or will have money held outside the superannuation system in a family trust, which some of my clients are doing,” Mr Hay-Bartlem said.


“That means the estate planning is different to if we have all the money just sitting in one pension account per member per fund.

“How we deal with passing superannuation on the death of one spouse or both spouses requires more thought and requires thinking about ... is it better to use structures like testamentary trust in wills or even skip generations and leave it with adult children or grandchildren?”

Mr Hay-Bartlem said the $1.6 million transfer balance cap will push trustees to consider other alternatives to simply transferring the accumulation account to the surviving spouse.

“If I had $5 million sitting in a pension, where once I could have just sent all that to my surviving spouse, I’m going to have a $1.6 million pension and a $3.4 million accumulation account,” he said.

“While the remaining pension may continue with the same reversionary beneficiary, depending on the commutation process and documents used, the reversion will not apply to the amount in the accumulation account.

“This may mean further documents are required, such as a binding death benefit nomination or to pass control of the SMSF appropriately,” Mr Hay-Bartlem said.

“The best options to people may be radically different to what they were before.”

Estate planning may be ‘radically different’ beyond July
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Are you up to date with the legislative changes from 1 July? Contribution cap increases, super guarantees, age increases, SG rate increases. The budget announcement changes. Don’t be caught off guard by your clients’ questions. Prepare for any scenario with the SMSF Foundations course. 21 CPD hours available. Learn more

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