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Death of a Member

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Hello there,

I have asked theses to ATO Fanpage Facebook and they advised me to join here.

My concern is about SMSFs - Death of a member.
I did do the research on ATO website but I could not get it clear at all.

Hope you guys can help with my detailed situation as below:
- There is a couple having an SMSFs, they set up the structure as corporate trustee and they are the directors.
- So what if the husband passed away, in case he had nominted his wife to be the beneficiary for his death benefit? And his death benefit was fully in accumulation phase.

The question is:
1) If the superfund has to pay out his benefit as a lump sum to the wife?
2) Or if the wife would like to continue keeping the death benefit within the fund, how could we deal with this situation?
Could the accumulation balance of the husband be transferred to his wife and be stayed in accumulation phase or it has to be started as an income stream (pension phase) for the wife?

I'm very appreciated if you guys can help and give me a specific explanation.
I'm learning about SMSFs and I would like to extend my knowledges in a very right way.
Sorry for any inconvenience if there is any mistake grammar in my topic.

Many thanks all ❤️
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ATO Certified Response

Devotee

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Hi moonluxubu

 

When someone dies their super money can't be transferred to someone else and become part of that other person's ongoing super savings. A superannuation death benefit must be paid from the fund.

 

A death benefit lump sum will always be able to be paid from a fund. If it's paid to dependants the lump sum will be tax-free. If it's paid to non-dependants there'll generally be tax payable.

 

If the rules of the fund allow it a death benefit income stream can be paid to a dependant or dependants.

 

People can nominate a death benefit beneficiary, but they can't nominate someone as a dependant. Whether someone is a dependant is set out in the Income Tax Assessment Act 1997 - section 302.195. A dependant includes a spouse or former spouse and children under age 18.

 

So - check the trust deed of the SMSF to see if a death benefit income stream is an option.

 

If a lump sum is paid this will be paid out tax-free as it's being paid to a dependant. It can then be re-contributed to super keeping in mind that these contributions will count towards the contribution caps - $100,000 per year for non-concessional contributions, $25,000 per year for concessional contributions.

 

I'm an ATO employee voluntarily providing my time here

2 REPLIES 2
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Most helpful response

ATO Certified Response

Devotee

Replies 1

Hi moonluxubu

 

When someone dies their super money can't be transferred to someone else and become part of that other person's ongoing super savings. A superannuation death benefit must be paid from the fund.

 

A death benefit lump sum will always be able to be paid from a fund. If it's paid to dependants the lump sum will be tax-free. If it's paid to non-dependants there'll generally be tax payable.

 

If the rules of the fund allow it a death benefit income stream can be paid to a dependant or dependants.

 

People can nominate a death benefit beneficiary, but they can't nominate someone as a dependant. Whether someone is a dependant is set out in the Income Tax Assessment Act 1997 - section 302.195. A dependant includes a spouse or former spouse and children under age 18.

 

So - check the trust deed of the SMSF to see if a death benefit income stream is an option.

 

If a lump sum is paid this will be paid out tax-free as it's being paid to a dependant. It can then be re-contributed to super keeping in mind that these contributions will count towards the contribution caps - $100,000 per year for non-concessional contributions, $25,000 per year for concessional contributions.

 

I'm an ATO employee voluntarily providing my time here

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Newbie

Replies 0

Hi SebReiter,
Thanks so much for your advice,
It helps a lot and I get all clear totally now.
Once again, Im very appreciated for your support!