When you have a will in place, there is a sense that you have done the right thing. But a question arises sometimes and that question is: if you have a self-managed superannuation fund, which allows you greater control of your investments as opposed to testamentary discretionary trust, what do you really want to see happen after you are gone?
Some experts believe that, upon your death, you need to make sure your will has a TDT that designates your spouse and children beneficiaries.
This will make sure that all death benefits go into the TDT account and protects your beneficiaries from a claim. The investment income can be split between your beneficiaries if the TDT account is created. Finally, if you have children from a previous marriage, they can also be named as beneficiaries if you choose.
If you want to maintain a tax-free status using your TDT account, you have to add language that restricts the beneficiaries to those that are death benefit dependents only, thus removing the option of naming additional, blended-family beneficiaries.
You have the option of setting up a non-binding nomination to your estate, but you give up a lot of control if you do this.
Once this is paid to the surviving spouse as it must be, it becomes his or her asset and there must be a deep level of trust that he or she will then give part of this to your children or otherwise handle it appropriately and responsibly.
SMSF wills are a continuing, conditional type that are specific and tells your beneficiaries exactly how your estate is to be divided.
It can provide tax free income by setting up pensions to all beneficiaries under certain terms. It can provide tax-free investment earnings, and it gives asset protection. It can even cater to those blended-family members who may not be included in a TDT arrangement.
If this seems interesting and you think it might work for you, you may want to contact a professional who can answer all your questions regarding different types of wills.
Source: Professional Planner, “SMSF wills versus testamentary trust wills – what’s the verdict” Jul. 30, 2014