Death and taxes go together like peaches and cream. However, they do not have to be experienced at the same time. A superannuation proceeds trust can ensure that the two are separated by up to 80 years. Tax delayed is tax saved. Let our Wills and estate lawyers assist you in drafting a super proceeds trust when it’s suitable.
What is a superannuation proceeds trust?
Typically set up in your Will, they are a type of testamentary trust. A superannuation proceeds trust is funded by superannuation death benefits and starts when its trustee receives superannuation death benefits from the executor of the deceased estate.
Why is a superannuation proceeds trust important?
The problem with preparing a binding death benefit nomination, by which you give your dependent children an account-based superannuation pension, is that the children must cash in the asset when they reach 25 years (at the latest).
However, the prospect of a child managing a financial windfall at that age can be a concern for some clients. A viable alternative to such a strategy is having a super proceeds trust.
Beneficiaries of superannuation proceeds trust
We can ensure that the beneficiaries of the super proceeds trust include only those that are delegated to receive it by law. This is limited to people who were tax dependents of the deceased at the date of their death, that is:
- A spouse
- Minor children
- Someone with whom the deceased had an interdependency relationship or;
- Someone who was financially dependent on the deceased.
To protect the integrity of the super proceeds trust, our estate planning lawyers can also discuss with you the ways other beneficiaries can be included in the Will by having them inherit other assets.
Benefits of a superannuation proceeds trust
The benefits of a superannuation proceeds trust include:
- Minor beneficiaries are taxed at ordinary adult rates, rather than at penalty child rates.
- Tax efficiencies. For example, there is no additional tax payable when the super proceeds are paid to the super proceeds trust.
- The trustee has wide powers and is not limited to just family members – it can be a professional advisor or another person known to the client.
- The trust keeps going for up to 80 years (unlimited in South Australia)
Speak to a Wills & estate lawyer
If you need to set up a superannuation proceeds trust, you can turn to Owen Hodge Lawyers. Call on 1800 770 780 or via our contact form.
Generally, the deceased’s superannuation fund is paid to their dependents – known as a ‘death benefit’. Alternatively, it can be paid to the estate.
Superannuation death benefits do not automatically form part of the estate of a deceased member. In most cases, the superannuation fund trustee will pay the dependents directly.
A grant probate or Letters of Administration may be required to distribute the assets from a superannuation fund. It is recommended that you speak to a probate lawyer before applying.
Taxes can apply depending on how the super is paid (i.e. income stream, lump sum or a combination of both) and if the beneficiary is ‘tax dependant’.