A very Happy New Year to everyone and I hope 2016 is amazing for you and your family.
I start this year wrestling with the issue of taxation on deceased estates. It is very often overlooked by the key beneficiaries of an estate as they are always keen to get their hands on the cash.
The problem is, before the Executor can make a payment, they must assess exactly what tax is payable, otherwise they will find themselves personally liable for the assessment by the ATO and no funds with which to pay the bill.
With rising balances held in self managed super funds it is more than likely that there will be a death benefit payable from that as the source of funds. Before making payments the trustee must calculate the tax payable to the person based on their status as a “tax dependant” or not.
A spouse will be able to receive a super fund payment without tax but a non-dependant adult child may not, subject to age, living at home status and study.
It is very important a Will maker take into account the different tax consequences for different individuals when making an allocation between family members in terms of the overall estate assets, including family trusts and super. This gets even trickier when you have second or third marriage status and children of prior relationships. How do you ensure they get their share but allow the source of income to continue for the spouse?
Control of a self managed super fund is critical and often the surviving spouse will want to maintain the assets within the fund if possible, so they can continue to receive the benefit of the tax status. It may be that the shares and Directorship as well as the constitution of the trustee company of a super fund, must be amended to ensure the right outcome is achieved and secured.
We are able to help our clients navigate the maze of legislation to achieve the right outcome according to their preferred allocation of estate assets.
Don’t forget to cover control of super funds after you lose capacity. A special purpose Enduring Power of Attorney is essential to appoint the right person to control the fund and to allow access for medical and living expenses.
I suggest that all Estate and Succession planning should be done in conjunction with the Financial Advisor and super fund or tax accountant, to achieve the maximum benefits.
Remember, it is too late when you have lost the ability to make decisions or when you die.
Do it now while you have time and invest the energy and expense to get it right. For more information … https://www.ato.gov.au/Individuals/Super/In-detail/Withdrawing-and-paying-tax/Withdrawing-your-super-and-paying-tax/?page=9