Last month in our previous post talked about the basics of super death benefit nominations, how tax applies and how they work in general and now we look at how they work for complex estate plans. If the self-managed super (SMSF) trust deed allows more complex estate planning strategies that include death nominations to be made to multiple beneficiaries or specific asset allocations especially with prior and mixed marriage situations, the benefits of SMSF are clearly higher than regular super funds, if this kind of planning is required/desired.
Most common SMSF trust deeds allow simple binding death benefit nominations (BDBN) as a default document that allows little more than nominating one or more individuals to receive a benefit. Where-as a basic nomination is usually the ONLY option available for members of large public offer funds. But these don’t allow for a beneficiary pre-deceasing a member, or leaving specific assets to certain beneficiaries.
For more complex situations, as part of estate planning (remember super does NOT form part of your estate and is NOT controlled by your will directly) a greater range of possibilities should be sought.
This would seek to cater for situations such as:
- Benefits to multiple beneficiaries;
- Allocation of benefits to alternative beneficiaries where one or more pre-decease a member;
- Allocation of specified assets to specified beneficiaries.
Some examples to illustrate the possibilities –
A. Margaret holds collectable assets in her SMSF, and constructs a BDBN that directs specific assets to certain beneficiaries, and the remainder to another beneficiary, as follows:
- A Monet to son Peter;
- A Ming Dynasty vase to daughter Heather;
- Remainder to husband Phil with a condition that should he pre-decease her, or is no-longer her husband, all remaining benefits will pass to Peter and Heather in equal proportions
B. Matt and Marsha, with Marsha’s son from prior marriage, Steve, who may not be a dependent of Matt’s at Matt’s death, so Matt prepares a BDBN as follows, that in event of his death, benefits pass as follows:
- First to Marsha;
- Secondly to Steve, if Marsha pre-deceases Matt, with a condition that it is paid ONLY if Steve is a SIS Act dependent at the time;
- Thirdly to Matt’s legal personal representative (LPR or estate) – here they can then pass to Steve under provisions of Matt’s will.
As each situation is different, speaking to an advisor is recommended.
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