With age comes experience — and often a greater focus on planning for the future. One important consideration is what happens to your superannuation and other assets when you pass away, and whether they’ll be distributed according to your wishes.

Inheritances in Australia

Whilst in Australia there are no inheritance taxes applied upon death – tax obligations remain and may be imposed upon a deceased estate or the beneficiaries who inherit assets from that estate.

Such taxes can include:

• Capital gains tax applied upon the future sale of inherited assets;
• Income tax applied on rental income from inherited properties;
• Transfer duty on the transfer of real property in some circumstances;
• Income tax applied on dividends received from inherited shares; or
• Tax applied on superannuation death benefits in the hands of certain beneficiaries (more on this later).

Wills

As the saying goes, if there is a Will there’s a way. But what is a Will?

A Will, put simply, is a legal document that outlines one’s wishes regarding the distribution of their assets and property after their death. It is imperative that your final wishes for the passing-on of assets are formally (and adequately) documented to ensure your intentions are executed as planned.

Superannuation death benefits

What happens to your superannuation interests upon your passing? For most Australians, superannuation is their largest asset outside of their family home. Superannuation death benefits do not automatically form part of your deceased estate and, as a result, are not necessarily subject to the terms of your Will.

Binding Death Benefit Nominations act as a ‘substitute’ to your Will in relation to your superannuation accounts – they provide instructions to the trustee of your superannuation fund on how to pay out your superannuation interests upon your death. Binding Death Benefit Nominations can be made in favour of specific beneficiaries, to your Legal Personal Representative (executor), or to a mixture of both. There are limitations as to who specific beneficiaries may be – essentially, your spouse, child, someone that is financially dependent on you, or vice-versa.

The tax treatment of a death benefit payment depends on the recipient of the payment. Generally, death benefit payments to your spouse or a financial dependent (including dependent child) are not taxed, whilst payments to your executor or non-dependent children attract tax at 15% or 17% respectively of the taxable portion of the benefit paid.

With this in mind, it is important to consider the inheritance of your superannuation balances in the context of your wider Estate Planning exercise.

Estate planning at ESV

At ESV, we take a holistic approach to assisting with your Estate Planning, including:

• Reviewing your net asset position, including both owned and controlled assets and superannuation balances.
• Understanding your personal and family circumstances and how these influence your testamentary intentions.
• Considering lifetime roles such as powers of attorney and enduring guardianships in the event of incapacity.
• Considering the structure of your financial affairs and the resulting tax implications.
• Working closely with estate planning lawyers to ensure your legal documents achieve the desired outcomes and that are future-proofed as much as practicable.
• Ensuring that reviews of estate planning arrangements are undertaken, whether based on a regular cadence, or as circumstances require.

If you don’t have a Will, or the information above has prompted a need to review your Estate Planning arrangements, please reach out to your ESV Engagement Team.