If you own a company, or are a shareholder of a company in your private legal structure, only the shares held in your name can be dealt with under your Will. If shares in the company are owned by a trust, you must consider who will be in control of the trust.
Ultimately, it is the shareholders of a company who hold the power. When you pass away your executors are not automatically appointed as directors. You must therefore consider who will be the shareholders. The shares owned by the deceased form part of the estate and can be left to beneficiaries.
Most people’s wealth resides in their home and superannuation. However, it is a common misunderstanding that Wills cover your superannuation. This is the case if the trustees of the superannuation fund decide to pay out the superannuation to the deceased estate, but this isn’t always the most advantageous strategy for the survivors, and cannot be guaranteed.
It is the trustee of the fund who decides which dependants receive what amounts, if any.
Binding Death Nomination
The only way to ensure the trustee of your superannuation fund pays your superannuation benefits to your estate, or to those dependants that you choose, is if you provide a written Binding Death Nomination to the trustee. This document binds the trustee to payout the distribution in accordance with your instructions, which may be to your Estate or directly to your dependents.
A Binding Death Nomination must be made with caution, and you must consider all aspects of your Estate Plan as this nomination could actually restrict other planning opportunities, which might be relevant to your family at the time of your passing. Most Binding Death Nominations are only valid for three years. The rules regarding Binding Death Nominations are covered under the superannuation fund’s Trust Deed and should be disclosed in the Product Disclosure Statement.
Self Managed Superannuation Fund (SMSF)
If you are a member of a SMSF, you are required to be a trustee, either individually or as a director of the trustee company. You must consider who is going to be in control of the superannuation fund after your death so you need to ensure the correct executors are appointed, or by leaving the correct amount of shares in the trustee company to the right beneficiaries.
Life Insurance Policies
Owning your life insurance policy in a superannuation fund is an efficient strategy from a tax and estate planning perspective. In many instances, the surviving family members will rely on this money for income or to pay debts. If these policies are owned in superannuation, you rely on the trustees of the fund to make the right decision in distributing these funds. Often these life insurance policies are owned under a separate fund to the superannuation fund where the member, or their employer, makes contributions. In this scenario, there would be two different trustees who make individual decisions about where to payout these benefits. In some instances, it makes sense that if there are proceeds in excess of what’s required to clear debts, these proceeds should stay in your super and the surviving spouse draws a pension.
Pensions are tax free for over 60-year-olds and the earnings in the fund are also tax free. For under 60’s, the pension is taxed at normal rates but the recipient will generally receive a 15% tax rebate. The tax saving can have a significant impact on long term returns and capital appreciation.
For more pointers on Estate Planning, join us next week when we talk about Testamentary Trusts. We can assist you with all aspects of Estate Planning, be with you at meetings with your lawyer or coordinate the process for you.
Feel free to call us on 07 3833 3999 for more information.