Tag Archives: Family

What happens to superannuation when you break up?

By Robert Wright /February 18,2022/

Depending on the situation, you might get some of your ex partner’s super, or they may get some of yours. See what you need to know.

A divorce from your husband or wife, or a separation from your de facto, could mean a division of your assets and debts, whether they’re held individually or together, and superannuation is no exception.

The agreement or decision to split super is part of the overall settlement process, which will consider all of the assets and liabilities of a couple.

Even if one of you hasn’t contributed to super for a long time, that person could still be entitled to a percentage of the other’s super.

Below we explain a few things you may want to know, noting that if you’re a de facto couple living in Western Australia, different rules may apply, as you’re not subject to the same superannuation splitting laws.

How is super split in a divorce or separation?

There are several ways superannuation can be split.

1. A super agreement can be put in place before, during or after your relationship, as part of a broader binding financial agreement, which can specify how super is to be split upon separation or divorce.
2. If you don’t have a binding financial agreement in place but have agreed how you’d like your super to be split, an Application for Consent Orders can be filed in court, without your attendance, to formalise the arrangement you’ve both come to.
3. If you can’t reach an agreement, you may instead consider applying for financial orders, where a court hearing will determine how super is to be split between the two of you, noting there are time limits in place to do this.

What’s involved in the process?

You may need to get information regarding the value of the super money that could be split between you. You can do this via your or your ex’s super fund, provided the request is for purposes related to the separation.

To get this information, you’ll need to provide various forms to the super fund, which you can locate in the Federal Circuit and Family Court of Australia’s Superannuation Information Kit.

Once the super splitting order is made, whether by consent or after a court hearing, you’ll also need to provide a copy of the order to the super fund for it to be effective.

Depending on the situation, if you want to defer making a decision around how super is to be split, or if you have an older style fund where splitting is not available until you’re eligible to start taking the benefit, you could establish a ‘flagging agreement’ where the super fund is unable to pay out super until the flag is lifted.

What potential costs might you come across?

Super funds may charge an administration fee for carrying out any requests around splitting super. These are separate to any costs for legal or financial advice, or court fees.

With that in mind, it’s worth checking what the super fund may charge for things like:

• an application for information
• a super split
• implementing a flagging agreement
• lifting a flagging agreement.

When will the money be paid?

Because there are rules around when super can be accessed, be aware that splitting super won’t necessarily result in an immediate cash payout, as super is treated differently to other assets and debts.

So, after the agreed amount has been transferred to your or your ex-partner’s super account, the money must remain there until a condition of release is satisfied. What that means is, generally, you can’t access super until you’ve reached your preservation age (which will be between 55 and 60, depending on when you were born) and you retire.

What other things should you consider?

Some couples choose to leave their super untouched. Instead, they factor in the value of their super accounts while dividing up their other assets.

With that in mind, it’s worth knowing the details of all your financial accounts, including your super, noting many Aussies have more than one super account.

You can search for lost or unclaimed super by doing a super search with your current super fund or by logging into your MyGov account.

Where can you go if you need more help?

Working out what you’re entitled to can be complicated which is why it may be a good idea to get independent legal advice, even if things are amicable.

You might also think about consulting with your accountant or financial adviser.

Source: AMP

What you should know about creating your will and estate plan

By Robert Wright /February 18,2022/

If you want to protect your family and assets, it’s worth documenting what you’d like to happen if you can’t make your own decisions later in life or if you pass away.

If you’ve got people in your life who you love and assets you’d like to be distributed in a certain way, you might be at a point where you’re thinking an estate plan would probably make good sense.

What is an estate plan? 

An estate plan involves drawing up a will, but also much more. It involves formalising how you want to be looked after (medically and financially) if you’re unable to make your own decisions later in life, as well as documenting how you want your assets to be protected while you’re alive and distributed after you pass away.

How does an estate plan help?

You can make your wishes known

One of the benefits of a solid estate plan is you can formalise your wishes in writing. This can help if someone challenges what you said you wanted after you pass away, or if you’re unable to speak for yourself.

You could minimise disagreements

Unfortunately, disputes can happen when assets need to be distributed among people when no clear guidelines have been set.

Being prepared with an estate plan could go a long way in preventing such disagreements should family members need to divide assets among themselves or make other hard decisions on your behalf.

You may improve tax consequences for your heirs

As the distribution of assets (including your income) can come with different tax obligations, a good estate plan could minimise any tax that your heirs may need to pay.

If they decide to sell something they’ve inherited, for instance, they may need to pay capital gains tax depending on what type of asset it is. 

Considerations when creating an estate plan

Do you want your will to be legally binding?

A solicitor or estate planning lawyer can help you draw up a will that is legally binding and covers what you’d like to happen with your assets, children (if you have any) and funeral when you pass away.

It’s important this document is kept up to date and that any changes to your situation (marriage, divorce, separation or otherwise) are accounted for, so those who matter most are taken care of.

While it’s also possible to draw up your own will (there are various kits available online), these may not be adequate in complex situations, which is why engaging an estate planning professional, even if you think your situation is relatively simple, will generally be worthwhile.

Keep in mind, if your will is deemed invalid, your estate will be distributed according to the law in your state, which may not align with your wishes, and claims could be made by unintended recipients. 

Who are your nominated super and insurance beneficiaries?

You might assume that how and in what proportions you want your super to be distributed can be included in your will, but this isn’t necessarily the case.

You’ll need to nominate your beneficiaries with your super fund and you’ll also want to make sure you’re across how long different nominations are valid for.

If you don’t make a nomination, the super fund trustee could use their discretion to determine who your super money goes to.

Meanwhile, if you have insurance outside of super, you’ll also want to make sure you’ve listed your beneficiaries on your insurance policy and that those beneficiaries are also kept up to date.

Will you appoint an enduring power of attorney to make decisions if you can’t?

There may come a time when you’re unable to make legal or financial decisions on your own because of advanced age or medical issues. Granting power of attorney means you assign someone to make these decisions on your behalf should a situation like this arise.

For this reason, it’s important to choose someone you trust, as they’ll be responsible for looking after your bank accounts, ongoing bills, and even selling your house if you need to move into a care facility.

It’s also worth noting that you may be able to appoint a different type of power of attorney depending on what tasks you’d like this person to carry out on your behalf. For example, you may want your son or daughter to make general lifestyle decisions for you, while you appoint a financial adviser to make financial decisions.

Have you chosen an executor to help carry out your wishes when you’re gone?

Generally, an executor is the person legally in charge of managing and distributing your estate, according to the terms set out in your will, with the assistance of a solicitor.

When you nominate an executor in your will, which your solicitor should also have a copy of, it’s important to let your family know, to avoid disputes after you pass away.

The executor should also have a good understanding of their duties and where your will and other important documents are kept. You may also want to let your family know where this information is stored.

The executor will typically be responsible for things like making funeral arrangements, ensuring your debts are paid and bank accounts closed, and collecting any life insurance.

They’ll also usually need to apply to the court for a grant of probate, which is a legal step that’s required before your estate can be distributed. A grant of probate certifies that your will is valid.

Do you need help with your estate plan?

Estate planning can be a complex process and there could be legal and tax implications if you don’t set things up correctly and understand the fine print.

For these reasons, it’s important to speak to a legal professional and your financial adviser before making any decisions and signing on any dotted lines.

Source: AMP

Do you value your assets more than yourself?

By Robert Wright /February 18,2022/

Value is a funny thing. One person’s trash can be another person’s treasure, as the old saying goes. The value we place on something tends to be very individual, and is generally a product of many different factors ranging from cultural background and upbringing to personality type and even life stage.

But as much as the way we view value varies from person to person, there are also some common views that tend to draw us together. According to research commissioned by TAL, Australians are seven times more likely to name their possessions as their most valuable asset, rather than themselves.

The research revealed almost all Australians find it difficult to understand their own value. As a result, we tend to base our self-valuation on the amount we earn and own, while neglecting the intangible things such as the value of the social and emotional contributions we make to the lives of our loved ones.

The things we value will change over the course of our lives

Unsurprisingly, the research showed that throughout every generation, the things we place value on will change as we move through different life stages.

For those in their 20s and 30s, building a rewarding and successful career tends to be a strong focus, whereas those approaching or enjoying retirement tend to be more focused on staying healthy and supporting loved ones with practical tasks.

But where it gets interesting is when we look at how Australians felt their changing views on value over time had impacted the decisions they made along the way.

The long-term impact of our views on value

According to the research, the majority (78%) of Australians undervalue themselves and their contributions to others which over time has led to some regrets, including poor life decisions relating to their long-term wellbeing, as well as actions around protecting what they value.

The common views on value that draw us together

Despite our views on value changing as we move through different life stages, the research also found there are key areas of our lives which we are each underestimating when it comes to understanding our personal value, and this can subsequently have an impact on the choices we make.

In fact, Australians tend to fall into one of four different personal value profile types, which will influence the things they value and choices they make across their lives:

Gregarious Go-Getters (24% of Australians) – these people generally strive to have a successful career and are more likely to undervalue the importance of taking care of their health.

Conscientious Carers (28% of Australians) – these people highly value the emotional support they give to their loved ones but may question the decisions they make in life and sometimes wish they did things differently.

Family-Focused Optimists (32% of Australians) – these people tend to take a family orientated approach to life. They take care of their health but place less importance on their career than other areas of their lives.

Ambitious Organisers (16% of Australians) – these people are more likely to sacrifice their long-term happiness to focus on a successful career and tend to underestimate the value of their emotional support and time to loved ones.

So why does the way we view value matter?

With the research showing that many Australians believe underestimating their own value has led to some regrettable life decisions, it’s important to consider how your present choices may impact you in the future and the things you will come to value over time.

After all, you are your most valuable asset – in every hour of every day, month and year of your life, especially to your loved ones.

Source: TAL

How does your pension live on after you die?

By Robert Wright /February 18,2022/

Account-based pensions offer a flexible and tax-effective method of drawing a regular income stream from superannuation. They are an essential part of your overall retirement strategy and are usually used from retirement until death. But what happens to your tax-free account-based pension when you do die?

Superannuation does not automatically form part of your Will unless a Death Benefit Nomination is completed to that effect. In this article we examine the nomination of an individual beneficiary, where the nomination of a member’s estate and a reversionary beneficiary nomination is not in place.

What are your beneficiary’s options?

The short answer is it depends. To receive your account-based pension your nominated beneficiary may have two options:

1. Commencing a death benefit pension; or
2. Receiving a lump-sum payment.

Both options are subject to additional eligibility criteria. Let’s briefly explore both options with our focus being option 1, commencing a death benefit pension.

Option 1: Commencing a death benefit pension

Features of a death benefit pension

A death benefit pension can basically be considered as allowing your account-based pension to live on after you die, for the benefit of your eligible beneficiary. Features of this pension are much the same as those for an account-based pension. Arguably, the most attractive feature is the tax-free nature in which the assets will reside. Recipients are required to receive a minimum cash pension payment each year which is based on their age and pension balance as at the previous 30 June.

Death benefit pensions can also be rolled into another fund at any time, however, they retain their identity as a death benefit. Therefore, a death benefit pension cannot be combined with other pensions or rolled back to the accumulation phase.

Is your nominated beneficiary eligible?

Generally, only your spouse is eligible. Adult children and your legal personal representative (your estate) would have to receive the benefit as a lump-sum withdrawal, i.e., the assets are removed from the superannuation environment and subject to tax on the taxable component. A dependent child (or children) may also receive a death benefit pension in limited circumstances; if they are under age 18; under age 25 and financially dependent on you; or have a prescribed disability.

Transfer Balance Cap

Another important matter to consider is your eligible beneficiary’s Transfer Balance Cap (TBC). To reiterate, the TBC is a lifetime limit on the total amount of funds that can enter the tax-free pension phase, currently at $1.7 million. Where your beneficiary has already commenced an account-based pension and does not have a sufficient remaining TBC to receive the death benefit pension, they may roll back their existing account-based pension into the accumulation phase to create room for the death benefit pension.

Option 2: Receiving a lump-sum payment

The alternative is to receive the amount as a lump-sum payment. With this option, the funds exit the superannuation environment. The benefits may be cashed as either in-specie or cash depending on your fund’s governing rules.

Conclusion

The death benefit pension option presents an opportunity for your eligible beneficiary to maximise the total amount of funds held within superannuation. While there are limitations on who can exercise this option and matters complicated by TBC, it is still worth considering as the assets will reside in a concessional tax environment.

Source: Bell Potter