Lawyer flags contentious issue with pension transfers
An industry lawyer has highlighted a technical issue with estate planning strategies where a pension is paid to a spouse but the account balance is transferred to the children of the original pensioner, upon the spouse’s death.
Speaking to SMSF Adviser, Townsends Business & Corporate Lawyers Michael Hallinan said there is some debate in the industry regarding a technical issue with strategies where the pension is paid to the spouse but on the death of the spouse, the account balance goes back to the children of the original pensioner.
“[So] the pension is payable to the primary beneficiary, he dies, it transfers to the second wife, and the intention is that upon her death the balance is to go back to the children of the primary beneficiary,” Mr Hallinan explained.
“Some people think there's a technical issue as to whether the children of the primary beneficiary are in fact SIS dependants of the second wife, and if they aren't, then how can the benefit transfer back to the children of the primary beneficiary?”
The other way of looking at the issue, he said, is that the benefit always remains the benefit of the primary beneficiary and his children are SIS dependants of the primary beneficiary.
“It’s a technical issue and people have different views. Personally, I think depending on the terms, it doesn't necessarily become the benefit of B, it always remains the benefit of A, and therefore the children of A are entitled to be paid that benefit, albeit most likely as lump sums,” he said.
Miranda Brownlee
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 also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
