Our service commences with us understanding your financial needs and objectives. This process we call ……Discovery.
The initial discussion is in a general advice environment and is complementary. Then at our second meeting we have a questionnaire completed and discuss in more detail strategies and structures that may achieve your goals. From that meeting and based on discussions and your risk tolerance, we prepare a statement of advice for your consideration.
If your satisfied with the recommendations in this statement, we are then engaged by you signing an “Authority to Proceed”. We feel its very important for clients to understand the strategies and the associated risks….. comfort levels rise with communication and knowledge.
There are two distinct roles in running a self-managed Super Fund. Firstly the administration and accounting responsibilities and secondly the investment strategy for the fund.
Our expertise and focus is in the provision of this investment strategy and co-ordination of the administration through our alliance partners. It’s our role to work with you and manage what will ultimately be your retirement nest egg. You don’t need to have ANY expertise, that’s our job !
In all our strategies there is one key factor that takes precedence – preservation of capital.
Wealth creation strategies will vary greatly upon the age and risk tolerance of the client. It is important to have the FULL range of options open to you.
We ensure our customer understand and are comfortable with the recommended strategy. Regular reviews and updates on performance are an importanty part of the service. Superannuation is a key strategy supported by the Government by allowing substantial tax benefits to people who wish to be self-supporting in retirement.
Self Managed Super Funds are a popular investment vehicle the advantage being that along with your advisor, you can decide where, when and how to invest your superannuation funds.
Estate Planning Considerations
Estate planning is the strategy that ensures your wealth is passed on in the most efficient and tax-effective way. A good estate plan will encompass both your personal and financial goals. It helps to determine your current financial situation, outline your wishes in the event of your death and make appropriate legal and financial arrangements.
Your estate plan will provide you with the comfort of knowing that your wishes will be carried out should anything happen to you in the future. This is a benefit not only to you but also to your family, who otherwise may face the responsibility of making decisions for you without your input. Some considerations are:
1. THE DECISION-MAKER
Who decides how your super benefits will be paid on your death? In the absence of a binding nomination or death benefit rule, the Trustee of your SMSF will decide who receives your super benefits. The obvious question then is…who replaces you as Trustee if you die? Can you pass your Trusteeship to a spouse/trusted person? What does your Deed say?
If you have a corporate trustee, what does the corporate constitution say? Should you direct the Decision-maker? Once you know who the replacement Trustee will be should you leave it to the trustee to make the decision on your benefits or is it better to direct the Trustee to follow your instructions?
2. THE RECIPIENTS
Who are the eligible recipients for your super payout? Recipients are limited to those persons defined in superannuation law and the deed as “Dependants”. Usually includes a spouse, child of any age, a financial dependent and an “interdependent” but care must be exercised to check what your Deed says. Step-children?
3. LUMP SUM OR PENSION
In what form can your super benefits be paid on death? Firstly, understand that your superannuation deed (and superannuation law) will say how your benefits can actually be paid. It should offer a wide range of flexible options including lump sums/pensions and income streams and mix of all.
4. IS TAX PAYABLE BY MY SUPER FUND WHEN I DIE?
Understand that there are two different types of tax potentially payable when a member of a super fund dies:-
A death benefit tax of between 15% and 30% may be levied on your super payout depending upon method of payment, identity of recipient and nature of the money in your super fund.
Capital gains tax may also apply when assets leave the SMSF after the death of a member. If there are large unrealized capital gains in the SMSF there should be a strategy for managing this liability.
5. WHO SHOULD I GIVE MY SUPER TO WHEN I DIE?
Once all of the previous points have been considered you will be in a position to decide the optimal way of distributing your super death benefits.
6. CAN THE TRUSTEE’S DECISION BE CHALLENGED?
SMSFs are exempt from appeals to the Superannuation Complaints Tribunal but the Supreme Court can review a Trustee’s decision if procedures laid down in the trust deed or superannuation law are not followed.
7. CASH FLOW ISSUES
Large “lumpy” assets inside an SMSF (i.e. a commercial building) raise special issues including potential cashflow problems if one of the members dies. The whole or part of the building may need to be sold to pay the death benefit and this may trigger capital gains tax.
8. BORROWINGS
If your SMSF has borrowed money to finance the purchase of a fund asset have you thought how that loan will be repaid if you die?
9. RESERVES
If your SMSF has Reserves there are special rules about who can access them on your death and a hefty tax can apply if you get it wrong.
Each of the above issues needs to be examined to ensure that your family’s unique needs are met.
Managing your risk
Financial Planning is more than just about saving money, it is also about managing current and future risk. The common belief that ‘it won’t happen to me’ often results in many people having a sound plan for wealth creation but not an adequate plan to protect the very thing that generates the wealth – themselves!
How death or illness affects your ability (or your family’s ability) to realise your lifestyle goals and objectives will depend on the wealth protection strategy you have in place. By taking out appropriate insurance you can eliminate risk and provide financial protection.
Insurance can be structured to provide for such things as the repayment of debts upon death or disability, financial assistance for dependants, and protection against the loss of income. We offer our clients access to the full range of personal insurances including Life, Trauma and Income Protection.
Here are 10 common mistakes that people make in this area:
- Not having enough cover
- Having the wrong type of Income Protection
- Relying on your employer to pay premiums
- Underestimating the benefits of Trauma insurance
- Paying tax on life payouts in super
- Having inferior Income Protection cover in super
- Basing decisions on price alone
- Choosing the wrong TPD cover
- Paying all premiums from retirement savings
Failing to regularly review their needs
Over 55 years of age and still working? Stop paying tax on the earnings of your superfund !!!
Often described as a transition-to-retirement pension (TRIP) is the super saver’s version of ‘having your cake and eating it’. A transition-to-retirement pension enables Australians aged 55 or over to access their super in the form of a pension (income streams) without retiring or satisfying another condition of release. This combined with salary sacrifice to super can have very significant tax benefits.
TRIPs were originally introduced in July 2005 to help Australians wanting to transition to retirement via part-time work. By starting a TRIP, you don’t have to retire to withdraw your super benefits. You can work part-time or full-time or even casually. Although a minority of individuals use TRIPs for a gradual transition into retirement, the majority of TRIPpers use the strategy for boosting super savings and tax minimisation.
The key marketing message many advisers use when promoting a TRIP is: most Australians aged 55 and over can boost super savings while cutting their tax bill, depending on an individual’s level of income and marginal tax rate. One of the more popular TRIP strategies is to salary sacrifice into your super fund up to your concessional (before-tax) contributions cap, and replace that income with tax-free (if over 60) or concessionally-taxed pension payments (if under 60). The right combination of salary and super will depend on your salary level, your age, your tax position, the size of your super benefit and your income needs on to Retirement pension.
The Key Benefits:
Ease into retirement
Ease into retirement by reducing your working hours without reducing your income. By structuring your income differently, putting more of your pre-tax salary into super, and receiving regular income from both your employer and a Transition to Retirement pension, you can pay significantly less tax, allowing you to maximise your retirement savings.
Increase your retirement savings without impacting your income. Although it may sound hard to believe, using a Transition to Retirement Pension while still working full time can help boost super savings without reducing your current income. That’s more super for when you retire, without having to give up any extra today.
Boost Income
Boost your income so you have more money for everyday living expenses. If you have sufficient retirement savings, you can use a Transition to Retirement pension while you are working full-time to boost your income. And the increased income you receive can be put to work by reducing your debt or funding projects such as home improvements.