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Wills and Superannuation |
Clark McNamara Lawyers can advise you on the terms of a will to ensure that your assets are distributed as you want and without hidden costs. Consider this likely scenario. |
Fred and Mary Smith decide to prepare their wills. They have three adult children, all of whom are financially independent. Fred decides to prepare a will leaving everything he owns to Mary and the children in equal shares. Mary does the same in reverse. Many of Fred’s assets are in a self-managed superannuation fund, so he specifies that any death benefits should be shared equally between the four family members. |
Soon after the wills are signed Fred passes away, but the outcome for the family is not as good as he would have wanted. Why? |
The Sting |
Superannuation benefits paid to a spouse or dependent children are exempt from tax up to the member’s reasonable benefit limit (RBL). Benefits paid to in-dependent adult children are not. |
Fred’s death benefit was $400,000, well within his RBL. Mary received her share of $100,000 tax free. Fred’s three children are entitled to deduct the tax-free threshold (currently $96,637) from their 75 per cent share. They are taxed at 15 per cent on the surplus. They therefore collectively receive a tax bill of $30,504. |
Avoiding the Sting |
Avoiding the problem is not difficult if the estate is big enough. Instead of leaving things equally between Mary and the children Fred could have left any benefits payable by superannuation funds to Mary alone. |
Equality can be achieved by gifts of other assets if there are enough. If not, the problem can be eased by leaving all non-super assets to the children so that as much as possible of the super goes to the spouse. |
