Superannuation balances are a significant part of one’s wealth. They are especially important when receiving a regular income for living expenses. If you or your partner passes away, the surviving spouse generally wants the finances to be as simple & tax effective as possible. It is also often preferred, that the surviving spouse doesn’t miss a regular income payment.
The challenge
The problem is, when you are receiving a regular income from super, simply adding your partner as a super beneficiary, may not be ideal when you pass away.
In many cases, when a partner dies:
- The super fund sells all their investments.
- The money is withdrawn from the tax-free rate (0%) of super and gifted to the surviving spouse.
- The money then needs to be invested again.
- Lastly, the surviving spouse may have issues contributing these funds back into superannuation and instead they may have to start paying tax on investment returns.
- This process could take weeks or months to complete, and your partner won’t receive an income during this time.
The solution
The good news is that there is a far simpler approach, by simply ticking a box on the super beneficiary form.
The solution is that your super account is simply transferred to your surviving spouse. There is no selling of investments, the money can stay being invested tax-free in super plus, your surviving partner may not even miss a regular income payment.
Considerations
As often is this case, the solution doesn’t suit everyone. It may be simple and fast solution. However, this approach may prevent the surviving spouse to contributing more to super. The zero-tax rate of super is very appealing and if they were wanting to add part of the inheritance or other funds to super, the automatic transfer approach may prevent them from doing so.
Next steps
We can discuss what approach is best for you. Please reach out and our team can recommend the best strategy for you.
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Disclaimer
This information is general advice. We have not considered your objectives, personal or financial circumstances. You should consider the appropriateness of the advice for your circumstances before making any decision. You should obtain and consider the relevant Product Disclosure Statement and seek the assistance of an authorised financial adviser before making any decision regarding any products or strategies mentioned in this communication.
Past performance is not an indication of future performance.
This presentation has been prepared and presented by Roger Perrett, Freshwater Wealth Management Pty Ltd CAR no.1307016, Alliance Wealth Pty Ltd AFSL No.449221. This information cannot be used or copied in whole or part without our express written consent.
While every effort has been made to ensure the accuracy of the information, it is not guaranteed. It is based on our understanding of regulations and laws as at the publication date. As these are subject to change you should talk to a professional adviser for the most up-to-date information.
To the maximum extent permitted by law, no person including Alliance Wealth Pty Ltd nor its related entities, employees or representatives accepts responsibility for any loss suffered by any person arising from reliance on this information.
