Estate planning is one of the most pressing challenges for SMSF experts in light of new super regulations that largely come into effect on July 1 this year.
This was the focus of Cooper Grace Ward partner Scott Hay-Bartlem’s session at the conference, One thing in life is certain.
“There are two implications from the new laws,” Hay-Bartlem explained. “The first is how we need to change our approach to estate planning in light of the new rules. Secondly, advisers must identify which clients may need to re-think their strategy as we move into the new environment.”
A number of the budget changes require SMSFA members’ close attention. One important consideration is changes to the way SMSF accounts will be structured.
“Some clients who used to have one big pension will now have pension and accumulation accounts in the same fund,” Hay-Bartlem said. “And potentially some clients will hold more assets outside super than inside this environment. Advisers must take stock of these eventualities and review clients’ arrangements on this basis.”
He said that in the past, in a situation where advisers may have recommended a reversionary pension, they may now instead suggest establishing a binding death benefit nomination.
“Someone with $2 million in super may now have $1.6 million in pension phase and $400,000 in an accumulation account,” he said.
Hay-Bartlem said the new transfer balance cap rules require a rethink in the event one fund member dies.
“When a couple combined has more than $1.6 million in super, when one dies, we’re now going to have an excess transfer balance cap issue for the survivor. We won’t be able to just keep the other pension going or pay the pension to the survivor.”
These are substantial changes within a system that is already complicated. As such, delegates who attended this session benefited from gaining a deeper insight into the details of the new super laws.
