SMSFs urged to consider excess transfer balances with estate planning
SMSF trustees in blended families may want to consider what control their spouse has over excess transfer balance amounts following their death, says an industry lawyer.
Hill Legal principal Chris Hill said if there are two members that are in retirement phase and the member who is dying reverts their pension to the other spouse and there’s going to be an excess transfer balance, then from the ATO’s perspective there’s a choice for the remaining member.
“The choice can be that the receiving member can roll back any excesses to accumulation phase or cash out of the fund,” Mr Hill explained in a podcast with the SMSF Academy’s Aaron Dunn.
However some clients, he said, won’t want the remaining the spouse to have that choice and want to make that election themselves instead.
“For most people who are in non-blended families, they may be happy to leave that choice to their surviving spouse but for a blended family it might be different,” he said.
“[They] may want to specify, for example, a non-reversionary pension up to the transfer balance cap and any excess be paid pursuant to the death benefit nomination.”
This removes the choice from the surviving member as to how the excess is dealt with, he said.
It is important that clients in this situation, who are using both a reversionary pension and death benefit nomination, he said, include a paramount document into the deed, which sets out which documents have priority and how benefits are to be distributed or dealt with.
“If we make it a paramount document, the trustee is then bound by that decision in respect to the excess,” 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.
