Tuesday, February 25, 2014

Receipt of superannuation death benefits

Following a recent post, I had a number of enquiries, and one particular adviser raised an issue with me which (as she flagged) is often overlooked.

The particular issue relates to the payment of superannuation benefits on death. The legislation requires (and there have been cases supporting this) that the recipient of any death benefit must be alive on the date of the payment themselves – in other words, if the recipient is no longer living at the date the payment is ultimately due to be made, then neither they (nor their estate) will be entitled to receive it.

There are a number of ways to minimise the impact of this rule, however the steps must always be taken as part of the overall estate plan.

Until next week.

Image credit: SalFalko via Flickr

Tuesday, February 18, 2014

Estate planning 101 with superannuation entitlements

Last week, I was again reminded of the very strange way in which the superannuation laws currently operate concerning death benefits, and more particularly, the distinction between someone withdrawing their superannuation on the day before death as opposed to it being paid out as a death benefit.

All other things being equal, it is often very likely to be the case that a withdrawal immediately before death will be completely free of tax, whereas the same funds distributed as a death benefit can be liable for tax of up to 30% (plus Medicare).

Obviously, there are a range of competing issues that need to be considered as part of any superannuation and estate planning exercise, however we are certainly seeing an increasing number of people more seriously consider the total amount they wish to retain in super in their later years.

Until next week.

Image credit: 401(K) 2013 via Flickr

Tuesday, February 11, 2014

Digital assets on death

digital, assets, digital assets

The virtually limitless ability to create digital content has seen an increasing amount of media attention focused on ownership of content, particularly in the event of death.

In most jurisdictions, government legislation does not separately deal with digital assets, and therefore, the same rules that apply to physical assets will generally apply.

Unfortunately, many of the rules in this area lack this sophistication required to deal with digital platforms that are normally either hosted outside Australia, or alternatively, perhaps outside any discrete jurisdiction on the basis that they are cloud based.

While most digital platforms do offer deactivation mechanisms or automatic closure due to inactivity (similar to the much publicised approach taken by Google), these features do not necessarily of themselves assist in relation to ownership of the data.

Ultimately therefore, digital assets should be treated in the same way as any other asset, and to the extent that they are of significant emotive or financial value, dealt with in the last will of the owner.

Alternatively, digital assets (including passwords) should at least be communicated via documents such as letter of wishes or memorandum of directions (click here for a template memorandum of directions on the View Legal site - via the 'learn' and then 'resources' tabs).

Some of the specific information that should be documented includes a listing of every digital platform utilised, account, user name and passwords for each platform, security question answers, and even directions as to post death activity and ultimate closure of the various accounts.

Until next week.

Image Credit: TheRealMichaelMoore via Flickr

Tuesday, February 4, 2014

Costs paid via superannuation

Last week's post looked at the debate surrounding the incurring of estate planning costs by superannuation funds.

While the conservative approach seems to be that all estate planning costs should be incurred by members personally, practically, there are a number of examples where having a superannuation fund incur the relevant expense would appear reasonably arguable, including:
  1. where a superannuation trust deed is being updated as part of an estate planning exercise, clearly these costs should be incurred by the fund; 
  2. where, as part of the update, binding nominations are prepared (either on a standalone basis or 'hardwired' into the trust deed), then again these costs are legitimately payable by the fund; 
  3. where superannuation makes up a significant component of a member's overall wealth and the member intends (either via binding or non-binding nominations) for their superannuation entitlements to pass via their will, then the costs of the will (including any testamentary trusts incorporated into the documentation) should also be able to be paid by the fund; 
  4. strategic advice to members in relation to the impact of death on their superannuation entitlements should also be properly payable by the fund; and 
  5. while the nexus might be slightly less obvious, ensuring that a member has a legal personal representative able to take over the trusteeship of a self managed super fund may also justify a fund incurring costs for implementing a member's enduring power of attorney. 
As with many similar topics, the general position outlined above will depend on the particular factual situation and the approach adopted by the advisers and firms directly assisting superannuation fund members in these areas.

Until next week.

Image credit: Katy Silberger via Flickr