Can you make a gift in your will to a self managed superannuationfund (SMSF)?
Yes. But it is rarely used and potentially treacherous path. However,if you find a safe way through your beneficiaries could reap substantial rewards.
Take the following scenario. Carlisle has two kids Jasper and Alice.Carlisle gets bad news from his doctor and he knows his time is up.Carlisle has not seen Jasper for 15 years.
Alice is 60 and has been caring Carlisle for a number of years. She hasno income, savings or superannuation. Carlisle is concerned that when he dies Jasper will go after his estate. He wants Alice to get all of his estate in recognition for her sacrifices. However, he is aware that Jasper isentitled to make a claim for family provision.
Carlisle establishes an SMSF and makes a contribution into itof $450,000 (the current maximum amount you can contribute tosuperannuation). Alice becomes a member and director of the SMSF.He then sets up a will with a direction that the executor of the estate (anunrelated third party) is to contribute $430,000 to the SMSF in favourof Alice’s member account. He also makes a binding death benefit nomination in favour of Alice.While the gift is still exposed if Jasper makes a family provision claim,the contribution of $450,000 is protected as superannuation falls outside the estate. The transfer from the Estate to the SMSF is allowed under superannuation law as the executor is not a related party. The SMSF canpay a tax free pension for Alice who can now retire comfortably. The$430,000 inheritance which Alice would be deemed to have contributed is still under her contribution cap limits. The $450,000 would have beena non-concessional contribution by Carlisle and would not be treated asa contribution by Alice.
This would give Alice a total superannuation interest of $880,000. Ifthe property had been inherited and invested she would have to pay tax on the income at her marginal rate.
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Carlisle has reduced the exposure of his estate to a claim and minimised the tax that Alice would have to pay in the future.
A note of caution. The above example is complex. It is subject to anumber of caveats. Hence it is important to get good professional advicefrom suitably qualified experts in Superannuation and Estate Planning.
Certus Law specialises in superannuation, trusts and estate planning.
Visit Certus Law at Level 5, 28 University Avenue,
T: 6268 9090, www.certuslaw.com.au
Stephen Bourke is a director in the boutique firm, Certus Law, specialising in superannuation, trusts and estate planning. He also consults to other practitioners through the consulting practice, SuperSplitting. Level 5, 28 University Avenue T: 6268 9090 www.certuslaw.com.au