How to sidestep those intergenerational wealth transfer traps

Professional Planner


February 17, 2017

SMSFs are often considered a suitable vehicle for transferring wealth, especially given the concessional tax and asset protection benefits they offer.

Prior to 2007, an adult child could join a fund when a member died, and receive an income stream, which kept the assets within the SMSF and the fund alive. Now, income streams aren’t as readily available and SMSFs are more constrained in the way benefits are paid.

As a result, funds generally need to be paid out when a member dies. The introduction of the $1.6 million transfer balance cap adds a layer of complexity to this process, especially if the beneficiaries already have substantial wealth.

As a result, effective estate planning is now more important than ever to effect the transfer of wealth between generations.

This was the focus of the SMSFA conference session run by Caroline Harley, senior counsel SMSF, Greenfields SMSF Lawyers.

Preparing for the next generation explored the considerations, risks and issues around the transfer of wealth from superannuation death benefits to the next generation.

“We used the conference case study to look at situations that could risk a member’s money from being paid out as intended,” Harley said. “We considered the family structure, and what happens to wealth inside and outside super in these situations.”

Delegates attending also received a better practical understanding of issues for their SMSF clients, and will be able to identify warning signs in the planning stages, she explained.

Senior practitioners shared their experiences and Harley encouraged delegates to share theirs as well. “It’s an incredible opportunity to hear about what works and what doesn’t,” she said.

At the end of the session, delegates had a more clear understanding of how to give clients peace of mind their estate would be handled as intended on their death.

Said Harley: “It’s all about reducing the risk of conflict, ensuring the least amount of tax is paid and encouraging clients to take a holistic approach to estate planning.”

Read all today’s stories from the SMSFA National Conference.

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