SMSF TRUSTEES NEED TO ADDRESS NEW ESTATE LAWS

Self managed super fund trustees should look into update their estate plans because of the raft of law changes that took effect on July 1 last year.

Changes that relate to the $1,600,000 cap on retirement income streams had triggered movements of wealth that blew up well-considered post-death plans.

But the changes put through by Federal Parliament early last year also presented opportunities for super estate beneficiaries to move their money around the system.

The changes force someone with more than $1,600,000 in a tax-free retirement income stream to take the excess out of super or move it into an accumulation account where earnings are taxed at 15 percent.

SMSF advisers had spent much of the financial year moving money out of the SMSF;s supporting income streams and jeopardising estate plans built around old balances and old laws.

Some estate plans that looked magnificent five years ago now completely messed up up because of what has been done.

SMSF's have been given extra time to file their annual returns for the 2016-17 financial year because of the complexities of restructuring funds to comply with the creation of the $1,600,000 cap on balances supporting income streams.

But advisers and trustees are stumbling across an array of unexpected problems created by the changes, including difficulties passing on death benefits from transition-to-retirement income streams to a partner who is not a full-blown retiree.

The provisions can see super money locked in legal limbo, particularly if the surviving partner is aged under 65 and cannot prove they're retired.

Federal Treasury has proposed a fix to the problems but trustees have to walk a legal tightrope until the likely changes are adopted.

People need needed to change the trust to overcome the potential problems with passing on transition-to-retirement income streams.

A good Trust deed would help deal with problems created by the new laws. The $1,600,000 cap on the balance of super income streams was triggering movements of money between family members and forcing people to investigate other options for setting up their family.

One option being explored is up of testamentary trusts for grandchildren to get money out of super when possible and into another low-tax environment.
The Changes have also created an increased focus on reversionary pensions, which involve a retirement pension going to a person's partner when they die and the surviving partner retaining most of the tax benefits of a super pension.  Many super trust deeds do not allow for the automatic triggering of a reversionary pension when the primary recipient dies.
Reversionary pensions can be an option but there is a question whether they had become "the new black".

SMSF trust deeds needed to have specific provisions to allow for reversionary pensions.  There need to be detailed provisions to allow for reversionary beneficiary, clear rules for reversionary payments to take priority over other payments and for provisions to remove the reversionary benefit.

Deeds should have specific provision to allow variation in pension terms.  Since July 1, a surviving partner has been able to roll superannuation death benefits between different funds.  Whereas before it generally had to stay in the fund held by the dead person if the beneficiary wanted to keep the legacy inside the superannuation system.
The money remains a death benefit regardless of whether it is moved to another fund. It cannot be returned to the accumulation superannuation phase and the pension payments stopped, but it can generally be withdraw as a lump sum payment.
The July 1 changes means people can retain the tax benefits of keeping the death benefit in super but move to a structure that was more suitable for their circumstances.

The ability to move to another fund was useful where business partners were both in an SMSF an the dead partner had passed his interest onto his spouse.
Rolling into another fund can be useful for someone shouldn't be in an SMSF or who should change to a different SMSF.

There could be the situation where the partner who 's excited about the SMSF dies and they leave behind the partner who says "I have super, what's an SMSF?".

You can roll them out to a retail fund. There is the ability to roll the money into a retail fund or super fund.

There are planning challenges for everyone, everyone should be looking at it, particularly when they have substantial funds in super and particularly SMSF's.
(Article supplied by the West Australian 19/2/2018)

My take on the whole super thing you would be better to put your money into a safe at home, they keep changing the goal posts so put your allowed sum into super and then bury the rest. I just cannot believe the Government doesn't encourage people to save whatever the amount into their super fund, sure once you have X amount in that account you dont need the pension we all understand that.  Some of us might not agree and I hear people saying I've paid my taxes all my life why am I not entitled to it!! Yes partially agree with that of course but you cannot take your money into the grave with you can you or can you? 
Of course you should consult a Finance Adviser I dont believe that self managed super funds are the way to go unless you are always on top of all the changes. (my opinion of course) 

MAKE YOUR OWN DECISIONS AND GIVE IT A REAL GO!!

SELLING MOSMAN PARK & THE WESTERN SUBURBS!!

KEEPING IT REAL IS OUR MOTTO!!