Join our investing community

Super benefits passed on to children

Discussion in 'Superannuation, SMSF & Personal Insurance' started by scys, 2nd Jun, 2008.

  1. scys

    scys Member

    Joined:
    31st May, 2008
    Posts:
    8
    How can a person ensure that his superannuation benefits are passed on to his children? Will it make any difference to the treatments if the children are all independent over 18?

    Thanks.
    :D
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

    Joined:
    9th Jun, 2005
    Posts:
    4,623
    Location:
    Sydney, Australia
    Isn't that what a will is for?

    Or are you referring to a specific scenario?
     
  3. Mark Laszczuk

    Mark Laszczuk Well-Known Member

    Joined:
    16th Aug, 2005
    Posts:
    793
    Location:
    Brisbane
    Use a binding nomination to ensure benefits are passed on to the people you want. Superannuation assets are not covered in a will, as assets held in super are held in trust and must be transferred according to the trust deed. If you do not have a binding nomination, the trustee must disburse assets according to the trust deed. Note that binding nominations generally only last three years, so you must ensure this is kept up to date. Your super fund will notify you when your binding nomination is up for renewal.

    Superannuation benefits paid to a dependent are generally tax free, but lump sums and pensions are treated differently. Lump sums paid to a dependant of any age are tax free, regardless of your age when you die. With income streams, if you are over 60 OR under 60, but the pension is paid to someone over 60 when you die, the taxed element of your super is tax free and the untaxed element (this is a rare situation) is taxed at marginal rates less 10%. If you are under 60 and the pension is paid to someone under 60, the taxed portion is taxed at the marginal rate less 15% and the untaxed portion is taxed at the marginal rate.

    For non dependants, you must pay the benefits as a lump sum, since after 1 July 2007, pensions are not payable to non-dependents (I'm not sure if this only covered benefits from 1st July 2007 onwards or included existing pensions - doesn't matter in your case anyway). The benefits will be taxed at 15% max. for taxed benefits and 30% max. for untaxed benefits.

    Definition of dependents:
    - spouse (or previous spouse)
    - de facto
    - children under 21 years of age (I think may also include children up to 25 studying full time)
    - same sex partners (about time, nice one Kevin! Cheers for bringing Australia out of the Dark Ages)
    - anyone financially dependent on the deceased

    There's probably more... Pretty sure I recall a few years ago that Costello told us we were going to have a simpler super system? LOL!

    Mark
     
  4. Simon Hampel

    Simon Hampel Co-founder Staff Member

    Joined:
    9th Jun, 2005
    Posts:
    4,623
    Location:
    Sydney, Australia
    Great post Mark - thanks!
     
  5. AsxBroker

    AsxBroker Well-Known Member

    Joined:
    8th Sep, 2007
    Posts:
    1,448
    Location:
    Sydney, NSW
    Awesome post Mark,

    Very nicely detailed.

    I remember (that sounds old) before Reasonable Benefits Limits (RBL) were scrapped any insurance benefits over the Pension RBL was taxed excessively so income streams were set up for the additional amount for dependents.

    Most trustees will want you to specify the relationship between you and your listed beneficiaries (ie, spouse, financial dependent, etc). If you don't they may not make the nomination binding and the trustee will have the final say if they do need to pay beneficiaries. With the binding nomination the trustee doesn't have the choice, they must follow your legitimate instructions.

    Some prudence may be taken to update your every two years, the thought (not my idea but I have heard it out there) is that you may be seriously injured and unconscious close to the end of three year binding period. At this time one would be unable to make another binding nomination when you need it most if something does happen and you pass away.

    Cheers,

    Dan
     
  6. scys

    scys Member

    Joined:
    31st May, 2008
    Posts:
    8
    hi, thank you all for your input.
     
  7. MattR

    MattR Well-Known Member

    Joined:
    23rd May, 2007
    Posts:
    229
    Location:
    Sydney
    Nice post.:)

    Mark...the recontribution strategy, can it be used to help "non-dependant" beneficiaries ?
     
  8. AsxBroker

    AsxBroker Well-Known Member

    Joined:
    8th Sep, 2007
    Posts:
    1,448
    Location:
    Sydney, NSW
    Hi MattR,

    Yes, recontribution can help. Obviously, a superannuant member needs to meet Conditions of Release and then the re-contributed funds won't be eligible for anti-detriment payments.

    The difference between recont and anti-detriment payments aren't very big. Though as far as I'm aware (anyone jump in if they think otherwise) anti-detriment payments are only available from super phase and not Age Based Pension/Annuities.

    Cheers,

    Dan

    PS Before making an investment decision speak to your FPA registered Financial Planner.