New year offers estate planning opportunities for trustees
The new year presents an opportunity for SMSF trustees to construct a more effective estate plan for their super, including looking at recontribution as a way to reduce the taxable component of any death benefits that may be paid out to their adult children, according to Tactical Super.
The SMSF audit firm’s director, Deanne Firth, told SMSF Adviser that despite recontribution being available as an option for an extended group of SMSF trustees for the last two years, take-up of the strategy had been limited.
“From 1 July 2017 you can continue to contribute up to 74 if you pass the work test, so this allows more trustees to better plan for their death, yet we still haven’t seen this strategy used broadly,” Ms Firth said.
She added that the strategy was of particular use to trustees whose death benefits would go to non-tax dependents, such as adult children. While tax was usually payable on a portion of these benefits, by withdrawing lump sum amounts from super and recontributing them over time trustees could reduce this taxable portion for their future beneficiaries.
“While the tax on non-dependents receiving a death benefit has been around since 2007, a lot of SMSF trustees haven’t been using recontribution strategies to increase their tax-free components,” Ms Firth said.
Ms Firth said she hoped to see more trustees consider tax efficiency in their estate planning in the coming year, utilising strategies such as super splitting as well as clear directions on where their death benefits should go after death to reduce disputes among family members.
