General Estate Planning issues (Wills, PoA, AHDs)

[tgh]

..this is the point of dumping it in a trust..
If they are happy with steady income and a growing capital base the trust earnings are taxable but negated by franking credits and the dividends can also be tax paid.. not a bad deal imo.
If they want a Ferrari they have to accept the very heavy tax implications that will come with it…..

 

[kpc]

The difference being whether the recipient is a dependent or not.

Yeah if your kids are adults and working...they have to pay tax on money (Super) that you have already paid tax on

Post automatically merged: Feb 10, 2023

..this is the point of dumping it in a trust..

Bingo!

 

[lakeman]

For non dependants the best option is for the superannuant to withdraw their super on their deathbed and have it form part of their estate ,to be dealt with as outlined in their will

 

[Pushka]

I went through all these with my Estate lawyer last week....the problem is laws now may change later. One thing I didn't know is that you can leave your Super to spouse with no tax payable, but if you leave it to your kids, they may have to pay tax on it at their marginal rate!

That is correct. I thought it was flat 15%? Not stated as such but it’s an inheritance tax. And if a beneficiary already has a house then there would be no right to occupy another CGT free.

If timing permits I’m getting all my money out of super first.
Need to get this stuff right.

And needs to be a Binding agreement in the super fund because we were told if it isn’t the Super fund can do what they like with it.

 

[BAM1748]

Wife is being taken care of in a number of ways. It's not personal. We have some money in Thailand and continuing to save. We will eventually build a house in Thailand. Land is in wifes name as I cannot own anything other than condos as a foreigner and daughter is too young.

Life insurance could be a good idea but I haven't researched much. I still don't know how life insurance works and how life insurance companies make money. Everyone dies right? If I take out a $250,000 policy right now the premiums are ~$110/month. Do the premiums increase as you get older?

A simple way to have life insurance is via your super fund, the premium amounts come out on money you are paying less tax on.

You’ll find for your 110 per month you’ll be able to get more value and make it go further.

 

[JohnK]

I'm technically eligible to withdraw my super in a few days if I'm retired. I really don't want to go down that path yet as I'm interested in the 20 years service or even 25 years service and the 10 week payout pretty much tax free.

If you withdraw the superannuation and put it back into a retirement account do beneficiaries still have to pay tax on inheritance? Something to research.

 

[BAM1748]

JohnK where are you located, I'd like to put you in touch with a tax accountant mate, nothing in it for me, who has been through some of the dramas you're talking about personally. If you don't have anyone doing your tax/super he might be able to help. I'll PM you.

 

[mel-world]

That is correct. I thought it was flat 15%?

Forgive me if I am talking about something else, but I though the 15% (+Medicare Levy) was only payable on the un-taxed component of your Super upon your death. While I could, post retirement but under 75, we withdrew almost all our un-taxed super and re-contributed it as a post-tax voluntary contribution, up to the annual limits.

We have very little taxable left in either of our accounts and, given the cost of travel now, we will not have much left at all in a few years. Spending the kids inheritance as quickly as possible - probably too quickly.

 

[Pushka]

Forgive me if I am talking about something else, but I though the 15% (+Medicare Levy) was only payable on the un-taxed component of your Super upon your death. While I could, post retirement but under 75, we withdrew almost all our un-taxed super and re-contributed it as a post-tax voluntary contribution, up to the annual limits.

We have very little taxable left in either of our accounts and, given the cost of travel now, we will not have much left at all in a few years. Spending the kids inheritance as quickly as possible - probably too quickly.

I understand it’s a tax regardless of any tax paid prior where the beneficiary is not a dependent or spouse. Adult kids don’t count as dependents. It's a non spouse death tax. All my super has been taxed. And it applies to me. I can personally withdraw it tax free. Assuming I get the choice I will be whittling it down and give it to the kids so I can see what it does for the family. Sons will have power of Attorney in a couple of weeks. Trust them implicitly.

 

[tgh]

A tad ot.. but it seems everyone needs a stash of cash in their own name.
As soon as one member of a joint account dies or is disabled..the account and all related cards are frozen.
So sometime soon we are going to open separate individual bank accounts and keep enough cash to cope if the worst happens
Caveat emptor

 

[Brissy1]

I went through all these with my Estate lawyer last week....the problem is laws now may change later. One thing I didn't know is that you can leave your Super to spouse with no tax payable, but if you leave it to your kids, they may have to pay tax on it at their marginal rate!

Yet if you leave super to a spouse (tax free) on the understanding it's for the children, they can then gift it to your non-dependant children also tax free. Can anyone anticipate where this plan might go wrong !

 

[kpc]

Yet if you leave super to a spouse (tax free) on the understanding it's for the children, they can then gift it to your non-dependant children also tax free. Can anyone anticipate where this plan might go wrong !

I never said that was an "understanding" in my post....

 

[Pushka]

A tad ot.. but it seems everyone needs a stash of cash in their own name.
As soon as one member of a joint account dies or is disabled..the account and all related cards are frozen.
So sometime soon we are going to open separate individual bank accounts and keep enough cash to cope if the worst happens
Caveat emptor

That's not right. If in joint names and one survives that account isn't frozen. And that applies if joint names happens to be a non dependent person And disability would be covered in P of A. This is how it worked for my parents. Parents in Law. Where I had P of A for both lots.

Post automatically merged: Feb 11, 2023

Yet if you leave super to a spouse (tax free) on the understanding it's for the children, they can then gift it to your non-dependant children also tax free. Can anyone anticipate where this plan might go wrong !

When you both die together.

 

[love_the_life]

A tad ot.. but it seems everyone needs a stash of cash in their own name.
As soon as one member of a joint account dies or is disabled..the account and all related cards are frozen.
So sometime soon we are going to open separate individual bank accounts and keep enough cash to cope if the worst happens
Caveat emptor

I have always had a separate account and credit card in addition to the joint ones. Also MrLtL. Friend once told me it was important to have escape money. Just recently another friend’s daughter had joint account cleaned out by estranged partner.

 

[tgh]

That's not right. If in joint names and one survives that account isn't frozen

We have some feedback that this has happened , but of course each case may be different.
I will ask for more info to clarify.

 

[Pushka]

That's not right. If in joint names and one survives that account isn't frozen

We have some feedback that this has happened , but of course each case may be different.
I will ask for more info to clarify.

Well, I can say in three instances where there were joint accounts that nothing was frozen, one as recently as 6 years ago when Mum died. My brother and I had P of A. As we knew her death was imminent we were advised by a Lawyer how to make changes to avoid complications after death. So we attended the bank, showed our Power of Attorney and created a joint bank account consisting of Mum, Brother and I. When Mum passed three days later we operated the account jointly and separately. No problems putting money into our personal account and money we both agreed on to a special granddaughter of Mums. Not my daughter but my brothers. Fortunately we have never experienced any family disagreements when it comes to Estates. Actually the account is still open, Bank shows it as just belonging to brother and I but there's zero balance.

 

[QF WP]

I'm technically eligible to withdraw my super in a few days if I'm retired. I really don't want to go down that path yet as I'm interested in the 20 years service or even 25 years service and the 10 week payout pretty much tax free.

If you withdraw the superannuation and put it back into a retirement account do beneficiaries still have to pay tax on inheritance? Something to research.

So you've hit preservation age or age 60.

If someone meets one of those conditions of release above (or retired after age 60 from an employer who was contributing to superannuation on their behalf is SG contributions; with no desire to work for than 10 hours per week), then one can access your superannuation (which is made up of two components, taxable and tax free).

Taxable component relates to those contributions made to your fund from an employer (which is tax deductible to the employer), or they were personal contributions for which the person obtained a tax deduction (originally self employed making contributions, but now much wider).

Taking part or all of the balance of ones' super in cash then frees the shackles of what is taxable and tax free (as it's then all tax free). If one is then under the age of 65, one can contribute back to superannuation as a personal contribution (which is tax free). This tax free status holds for both the superannuant and their beneficiaries (whether dependent or non-dependant).

 

[QF WP]

Forgive me if I am talking about something else, but I though the 15% (+Medicare Levy) was only payable on the un-taxed component of your Super upon your death.

That's my understanding as well, as a long term participant in the industry

It's taxable if payment is made from a taxable component of a death claim to either an Estate (where the tax is levied at 15%) or to non-dependents (where they, as natural prople, need to pay the curent 2% Medicare levy).

 

[QF WP]

Yet if you leave super to a spouse (tax free) on the understanding it's for the children, they can then gift it to your non-dependant children also tax free. Can anyone anticipate where this plan might go wrong !

Yes, as once it's in the spouses hands tax free, they are at liberty to do anything with (what is then) their own money. There are plenty of ways in which it can go wrong, including but not limited to:

1. Spouse pre-deceases you
2. Separation or divorce has happened and super member hasn't updated beneficiary advice. (Former) spouse doesn't hand over the funds, if they receive it in the first place (asssuming partial dependency is proven).
3. Current spouse doesn't hand over the funds.

For both 2 and 3, even an appropriately drafted "letter of direction" can be overturned by appropriately skilled legal counsel. It's a mindfield.

 

[Pushka]

I'm off to a HESTA superannuation session tonight.
From ATO re superannuation benefit paid to non dependent:

If you're not a dependant of the deceased, you can only receive the benefit as a lump sum.

The taxable component of the payment will be entitled to a tax offset that ensures the rate of income tax is as follows:

• taxed element – maximum of 15% plus Medicare levy
• untaxed element – maximum of 30% plus Medicare levy

So in our case, my reading and ignoring the UK resident son, they will pay 15% plus Medicare as it's all taxed.