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Trusts - The tax sting in death benefits |
Many people now have self managed superannuation funds constituted as trusts and are concerned to ensure funds are passed on without any loss of value. |
In one case, a couple nominated their children or each other to receive death benefits so they could access the benefits of a testamentary trust, under which the trustee would have a discretionary power to distribute between the various beneficiaries. A testamentary trust was attractive because it can have great tax benefits, as well as providing good asset protection. |
However, if the estate is nominated to receive the death benefit, it is assessed at 15 per cent tax on the taxable component of the death benefit. |
No tax would be payable at the death of the first partner if the couple chose to nominate each other to receive the death benefit. At the second death, assuming that by then the children are no longer dependants, it would be logical for the death benefit to go to the estate and into a testamentary trust. |
Contact Peter McNamara for advice on self-managed superannuation, trusts and the terms of your will. |
