Winter is coming and so are changes to the superannuation system, starting on 1 July 2017.
One of the major changes to the superannuation legislation is to limit the amount of superannuation that a person can have in a tax free pension environment. Members cannot transfer more than $1.6 million of their superannuation account into pension phase.
As a result, many members will need to restructure their financial affairs.
In addition, retirees who are receiving a defined benefit pension (such as a CSS or PSS pension) will have a formula applied to capitalise the value of that defined benefit pension, which will now count towards the $1.6m transfer cap.
You should particularly get specialist legal advice which considers the following issues:
- Is your Binding Death Benefit Nomination still appropriate? If you have previously nominated your partner to receive your superannuation after your death, and if after your death your partner would then have superannuation pensions of more than $1.6m, then you should get advice as to whether this is the most appropriate option. If you or your partner is receiving a defined benefit pension, this will also count towards the capital value of the pension.
- Should you consider including a testamentary trust in your Will? A testamentary discretionary trust can provide tax flexibility for your partner after your death as it enables your partner to distribute income between your family. Depending on your circumstances, and subject to financial advice, the inclusion of a testamentary trust in your Will may be a desirable vehicle for your surviving partner to manage their assets in a tax effective way after your death.
- Do you have a blended family and superannuation? It is common for couples in a second relationship or blended families to have a tailored estate planning strategy that divides assets between different family members. Due to the tax treatment of super death benefits and the inability to nominate beneficiaries in some funds, superannuation is often a key element in estate planning for blended families.
If you are in a blended family and you specifically considered your super when you last made your Will or updated super nominations, then you should get advice about whether the super reforms will have an impact on your estate planning.