Author: Emma Partenza, Manager, TAG Financial Services
A common estate planning question we receive is about the protection of elderly parents’ superannuation benefits, and specifically when one of them passes away.
Consider the situation. Dad passed away. Someone suddenly starts befriending Mum. The children are concerned – is there an ulterior motive to this unlikely befriending? Whether or not the friend is younger, or of the same or opposite sex is irrelevant. This has the potential to lead to possible fraudulent activity. The motivation may be genuine, and they may not set out to deliberately benefit from Mum. You cannot be too cautious as to whether someone is looking for a personal benefit to gain.
In such situations, consideration should be given to the following:
Trustee structure
Should a co-trustee or co-director of a corporate trustee be appointed alongside Mum? Such as an adult child, someone whom they implicitly trust. That person would become involved in the day to day running of the SMSF and be responsible for the investments and compliance of the fund with SIS. To provide further comfort, consideration should be given to having a co-trustee become a second signatory on any bank accounts so transactions can be monitored for such a situation. It is important to be mindful of maintaining Mum’s sense of autonomy and independence.
Binding Death Benefit Nominations (BDBN)
Where a BDBN directs benefits to be paid to one’s estate (to then be paid in accordance with their Will), opens superannuation interests up to potential legal challenge. If there is significant concern that Mums new friend is seeking a financial benefit and may contest her estate, consideration should be given to directing her superannuation benefits to beneficiaries directly (presuming they are superannuation dependants). This may mean death benefits tax is greater due to the Medicare Levy being applicable. Does a tax impost outweigh the benefits of a legal challenge?
Striking a balance between vigilance without being overbearing and destroying relationships with loved ones is naturally key here.
If you have any questions about these changes please contact us on 03 9886 0800 or via email.
Superannuation Strategies Online Seminar 2021, Now available on-demand. Register now and hear about how the changes (both proposed and approved) will impact your clients.
Technical Updates for Accountants
Receive super updates, webinar invites, seminar information and much more! Join our online community.
Specialist Advice
If you would like to discuss a project, contact us. Our advice is quoted upfront for your approval before commencement.
Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2021. Please do not reproduce without the expressed written consent of the author.