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Estate planning implications of Budget 2016

Glenn Freeman  |  23 May 2016Text size  Decrease  Increase  |  

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Glenn Freeman is Morningstar's online editor.


Budget 2016 could have far-reaching estate planning consequences for some self-managed super fund (SMSF) trustees, further emphasising the importance of a well-formed, legally binding plan.

There has been widespread coverage about the implications for trustees' own super balances and the retrospective nature of the proposed changes. However, there has been little discussion of the potential implications these contribution caps have for the next-generation beneficiaries of these assets.

"The Budget changes around super may well have made it more difficult to use an SMSF as an intergenerational wealth transfer tool, simply because the proposed new restrictions on getting money into the fund make it much harder to use certain strategies," says Brian Hor, special counsel on super and estate planning, Townsends Business & Corporate Lawyers.


Make a proper plan

This again highlights the importance of estate planning for SMSF trustees--something often overlooked or given inadequate emphasis in their broader financial planning strategy.

"A lot of people invest a lot of time and money in their financial planning--they want to minimise their tax legally, to maximise their asset protection and build wealth for a comfortable retirement. But death tends to be, for many people, a full stop, whereas it shouldn't be," says Robert Monahan, director of HLB Estate Services, a subsidiary of accounting and financial planning firm HLB Mann Judd.

"Your planning should proceed post-death, because your goals of being able to make things tax effective, [and to implement] asset protection can be passed on to the next generation."

While financial advisers often lament the high number of clients who lack the most basic estate planning tool--a will--even this is inadequate in many cases.

"Many people think that if they have a valid will in place, they have estate planning. But that's a bit like saying that because your employer pays the 9 per cent super contributions, that you have financial planning, but they're totally different things," Monahan says.

"Certainly, a will is an integral part of estate planning, it's the document that conveys everything you own. But in terms of super and family trusts, they're all things people control but they don't own, and aren't necessarily bound by anything outlined in a will."