Death Benefits: Who’s In, Who’s Out and How Much Tax do they Pay?
This session addresses the payment of superannuation death benefits on the death of a member, and the various tax traps and pitfalls that can catch advisors and their clients unaware. It covers:
- Who can receive super death benefits?
- Tax treatment of lump sum super death benefits and dependants – Who pays tax and who doesn’t:
- the difference between dependant for tax purposes and dependant for super purposes and why it’s important
- interdependence – who can it cover?
- can adult children ever be tax dependants?
- worked examples on tax dependency
- Tax treatment of lump sum super death benefits – Part 2 – how much tax will a non-tax dependant pay?
- taxable and non-taxable components – what are they and how are they taxed?
- calculating the taxable and non-taxable component
- taxable component – taxed and untaxed elements different rates of tax
- treatment of life insurance proceeds
- Tax treatment of lump sum benefits paid from defined benefit funds and government super funds - why they are different (overview only)
- A series of worked examples showing how super death benefits are taxed
- Payment of proceeds to a deceased estate – use of super proceeds trusts
- How can super death benefits be received: lump sum versus reversionary pensions
- Tax treatment of reversionary pensions
- Payment of super to a non-tax dependent on death - semi-automatic strategies to withdraw money out of super and into bare trusts
- Proceeds of life insurance policies held in super and bankrupt beneficiaries
Managing Binding Death Benefit Nominations: The Good, the Bad and the Ugly
Super will often be a client’s most significant asset. As a result, binding death benefit nominations can be an integral part of a client’s estate plan. This session looks at the key issues involved with making a bullet-proof BDBN, including:
- Types of nomination and eligibility
- Read the deed: does the deed allow for binding death nominations?
- Understanding what happens to death benefit if there is no BDBN or reversionary pension
- What are the consequences of an invalid BDBN and can a BDBN be overruled?
- Authorizing attorney to make binding death benefit nomination – extent of power
- Case update, including Re SB Ex parte  QSC 139, G v G (No. 2)  NSWSC 818
Reversionary Pensions: Maximising their Impact
Reversionary pensions can be a useful way to achieve certainty in the distribution of death benefits. This session will examine how to effectively use reversionary pensions, including:
- Understanding the client’s needs and wishes
- Who can be a reversionary pensioner and how to document it
- Are the pension terms consistent with the trust deed?
- How does the pension affect the transfer balance cap?
- Are there restrictions on how the recipient can deal with the pension?
- Case study: use of reversionary pensions in blended families
Super and Death: First Things First
What happens to the fund on the death of the member? While death is rarely at the forefront of a client’s mind, careful planning now can minimise potentially catastrophic consequences down the track. Through the use of practical case studies, this session examines the following:
- Maintaining complying status of the SMSF
- Compulsory payments on death of a member
- Soon as practicable payment to dependent or legal personal representative
- Operation of the reversionary pension on death
- What happens with a non-reversionary pension?
- Managing the transfer balance cap of the spouse of deceased
Trustee Discretion: Not as Clear Cut as you Think
In the absence of a binding death benefit nomination, the trustee can exercise their own discretion to pay the deceased’s benefits in a manner they see fit. However, not all trustees are created equal and poor decisions can be made. This session examines when the exercise of discretion can be impugned or challenged, including:
- Scope of trustee fiduciary duties
- What to look for in the fund rules and deed relating to trustee obligations and duties
- The role of a good faith test: Re Marsella; Marsella v Wareham (No 2)  VSC 65
- When can the exercise of discretion be impugned or the trustee removed?
- Is it possible to claw back discretionary distributions?
- Obtaining evidence of trustee action or inaction the subject of a complaint
- Prevention better than cure – preventative measures to ensure these fights don’t occur
- Lessons from case law: Katz v Grossman  NSWSC 934; Ioppolo & Hesford v Conti  WASC 389, Re Marsella; Marsella v Wareham (No.2) VSC 65