Your trustee not your will decides super allocation

A RECENT article on a couple receiving the age pension mentioned that their wills left all their assets to the survivor in the event of the death of one of them. This resulted in the survivor losing the pension. You used an example of a couple whose majority of assets were in investments. I assume this to be bank accounts and shares as I understand super would not be covered by the will?

My question is can a binding nomination to the trustee be worded in the same way as the will? For example, part of the assets to be left to the surviving children so that the survivor would retain the part pension?

As you point out superannuation assets are not distributed in terms of the will – it is the trustee of the fund who has the final decision. If you execute a binding nomination on the fund, the trustee would normally be required to do as a document says. It would certainly allow you to instruct that your superannuation assets be distributed to your surviving children in any way you please.

MY parents are in their mid 80s and receive a part pension. They own their own home and have just sold an investment property, which will give them about $300,000 in cash. They have a share portfolio of about $400,000, which generates a modest income for them. What do you suggest they do with the $300,000 cash? As their children, we have no interest in receiving an inheritance, but we think the cash should remain reasonably accessible in case our parents decide to go into care.

It is most unlikely they will spend the money before they die, so I guess they’re in what we call the custodian phase of their lives – this means taking care of the money for their estate. Over the long term, shares should give better returns than cash. As they’re familiar with shares, it may be worthwhile having a family meeting to discuss adding part of the $300,000 to their share portfolio, and keeping the balance available for liquidity. I assume you have made provision for capital gains tax on the sale.

WHEN shares are owned “jointly’’ and one of the two holders dies, what is the procedure for transferring ownership to the survivor? Is this transfer a “sale” and does it therefore trigger a capital gains/losses event?

As the shares are jointly owned they will pass

Death does not trigger capital gains tax, it transfers the liability to the beneficiary who will pay when they dispose of the asset

automatically to the surviving owner. It will be necessary to provide the share registry with a copy of the death certificate.

Death does not trigger capital gains tax, it transfers the liability to the beneficiary who will pay capital gains tax only when they dispose of the asset. This may be many years in the future. This is why it is important to take expert advice before selling any shares that are left to you.

Noel Whittaker is the author of Making Money Made Simple and other finance books. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Email: noel@noelwhittaker.com.au