General Estate Planning issues (Wills, PoA, AHDs)

[Happy Dude]

A couple has an investment property or two in joint names. One of them dies so the property transfers to the surviving spouse. Being an investment, what about CGT upon transfer? Then there is stamp duty. Depending upon how long the property(s) has been owned, there could easily be a million or two gain. How do you handle such an imposition? Sell?

Would seem there’s no CGT At death

How CGT applies to inherited assets | Australian Taxation Office

How CGT applies when you sell an inherited asset, or it passes to a foreign resident, charity or super fund.

www.ato.gov.au

Inheriting the IP(s) doesn't trigger CGT or require stamp duty, but there would be CGT if/when the surviving spouse sells. Not sure if the CGT discount clock resets in terms of the sole spouse's ownership or carries over (probably the latter). The ATO link could be clearer.

I'll be getting specific advice about a similar situation soon. Some assets are CGT exempt, eg main house, while others (eg long held beach house) are not, so who inherits what is not straightforward and could trigger a massive GCT bill if sold.

 

[Pushka]

Because i don't trust the Govt, any Govt, and i dislike the tax on inheritance with one child overseas. Given the rate of return maybe bank interest might be better anyway and we know we won't spend it away.

I cannot find words to comment on this….

I can only assume you don't mind Governments changing rules to suit them - nor paying death duties by another name. We won't qualify for any Centrelink so don't worry we won't be consuming any government benefits if that's your concern. If we were still running our own SMSF we would likey have done it anyway. Not like our Super has been brilliant in returns lately. And its an industry one.

 

[Pushka]

Inheriting the IP(s) doesn't trigger CGT or require stamp duty, but there would be CGT if/when the surviving spouse sells. Not sure if the CGT discount clock resets in terms of the sole spouse's ownership or carries over (probably the latter). The ATO link could be clearer.

I'll be getting specific advice about a similar situation soon. Some assets are CGT exempt, eg main house, while others (eg long held beach house) are not, so who inherits what is not straightforward and could trigger a massive GCT bill if sold.

That's a tricky one as normally the CGT would be shared between two people but with one gone, is it back to 100% less the usual discounts on length of ownership etc.

 

[love_the_life]

.....

Did your parents not have all their assets in joint names or was their will not correctly written or differently written so it just wasn't handed over?

We don't plan on touching anything for a year or so so still in accumulation phase. If bank interest is worth it maybe a lump sum! Before the rules change.

Mum and Dad had a lot of assets in joint names but when they bought shares, it was usually some in Dad's name, some in Mum's and some in joint names. It was these type of investments that remained in the estate.

The out of wedlock grandchild does make it more complex.

 

[Pushka]

Mum and Dad had a lot of assets in joint names but when they bought shares, it was usually some in Dad's name, some in Mum's and some in joint names. It was these type of investments that remained in the estate.

The out of wedlock grandchild does make it more complex.

On so many levels for you. Make sure you have a great lawyer.

 

[Buzzard]

Do you really need an insurance policy?

I / we don't. There are no dependant kids, daughter is in her 40's with husband and own kids. Given our assets +1 will have plenty to live off should I fall off the perch and likewise should she drop off first.

 

[CaptJCool]

That’s why I’m happy to stay with the state super where all the politicians have their money

Or Federal schemes

i can tell you though
the SA Superannuants are unhappy at paying tax on their pensions even where they pay not tax on their contributions (constitutionally protected fund)
federal employees do pay tax from age 60 on the portion of pension that is indexed - plus special provisions for the $1.6 million TBC where the $10,000 tax offset, when this portion is over $100,000, is progressively reduced.

im sure in time it will come out how much tax gets paid on Swannies $300-400,000 super pension.....

also, damn good deal this passing on death to partner but like all good things they do come to an end for single people upon death

 

[mrsterryn]

Or Federal schemes

i can tell you though
the SA Superannuants are unhappy at paying tax on their pensions even where they pay not tax on their contributions (constitutionally protected fund)
federal employees do pay tax from age 60 on the portion of pension that is indexed - plus special provisions for the $1.6 million TBC where the $10,000 tax offset, when this portion is over $100,000, is progressively reduced.

Yeppers we both pay tax on our defined benefit. Well we owe tax

Post automatically merged: Feb 27, 2023

Re the single thing. I know I have maxed out my contributions in my super. However husband does have a few years to go before his maxes out
If I predeceased him

 

[Pushka]

also, damn good deal this passing on death to partner but like all good things they do come to an end for single people upon death

unless you've been able to set up a joint account with someone who will inherit with super funds already drawn down. Except in that event it's not an inheritance but surviving owner.

 

[CaptJCool]

unless you've been able to set up a joint account with someone who will inherit with super funds already drawn down. Except in that event it's not an inheritance but surviving owner.

Unlike defined benefits that’s only paid while you are alive (and passes to your immediate partner while they live) and dependant children only til age 25...

I notice in todays $3 million announcement they are planning to tax defined benefits. Seems the politicians don’t know these are already taxed at 39/47% if the recipient grosses likely rough estimate over approx $300,000 pa now (tax-free approx $96,000 plus $204,000 fully taxed at marginal rates) and zero tax offsets because of the transfer balance cap issue. And as time goes on the indexed part grows by CPI so must ALREADY face the 39/47% taxing rates

 

[Matt_01]

As I get older and fly less I am becoming more interested in threads such as this one. IIRC in the 80/90's when Bob and Paul (John) were running the show and inflation was high and interest was around 17% the then treasurer realised there was heaps of money tied up in DFRDB (defined benefits) and changed the rules and a new defined pension scheme was set up for the defence force. I will only assume the same rules applied to other 'Govt employees' but did not apply to the politicians who make the rules.

 

[Brissy1]

Unlike defined benefits that’s only paid while you are alive (and passes to your immediate partner while they live) and dependant children only til age 25...

I notice in todays $3 million announcement they are planning to tax defined benefits. Seems the politicians don’t know these are already taxed at 39/47% if the recipient grosses likely rough estimate over approx $300,000 pa now (tax-free approx $96,000 plus $204,000 fully taxed at marginal rates) and zero tax offsets because of the transfer balance cap issue. And as time goes on the indexed part grows by CPI so must ALREADY face the 39/47% taxing rates

Would you indicate the source where defined benefits are to be included in the gov $3m proposal please? Can't find it.

 

[CaptJCool]

Would you indicate the source where defined benefits are to be included in the gov $3m proposal please? Can't find it.

Yes

at 24.40 re question of defined benefits
at 27.30 no intention to indexation the $3 m threshold

 

[Brissy1]

I will only assume the same rules applied to other 'Govt employees' but did not apply to the politicians who make the rules.

Correct it didn't apply to the politicians...they had an even better scheme requiring much lower "years of service" to qualify.
But later opposition leader Mark Latham (bless him) in 2004, I think, promised to close the scheme to new entrants (edit: if elected), and the gov matched that promise.

 

[Brissy1]

Yes

at 24.40 re question of defined benefits
at 27.30 no intention to indexation the $3 m threshold

Yes I get it now, PM's answer shows that he doesn't understand his own defined benefit scheme. Perhaps he'll accidentally REDUCE the top marginal tax rate on defined benefits super to 30%, if all super income derived from a value above $3m is to be taxed at 30%

 

[CaptJCool]

Correct it didn't apply to the politicians...they had an even better scheme requiring much lower "years of service" to qualify.
But later opposition leader Mark Latham (bless him) in 2004, I think, promised to close the scheme to new entrants, and the gov matched that

There’s now 2 schemes in play with one variation

PCSS closed to new members @ 2004 election but can take pension at any age
Variation However if elected for first time @ 2001 election can only take pension from age 55

From 2004, 15.4% of super into an accumulation scheme of members choice with SMSF option from 2015
upto 50% can be salary sacrificed
default scheme is now Australian Super

 

[CaptJCool]

Yes I get it now, PM's answer shows that he doesn't understand his own defined benefit scheme. Perhaps he'll accidentally REDUCE the top marginal tax rate on defined benefits super to 30%, if all super income derived from a value above $3m is to be taxed at 30%

No, it won’t be accidentally reduced

the Stage 3 tax cuts will deliberately do some of the heavy lifting .. haha reduced anyway...


PS There’s was only 18 contributing members left prior to May 2022 election

 

[Pushka]

Wills signed yesterday so just about 10 days before we fly out to Middle East. Power of attorney is more complex as both kids have to sign the same form and will take one for the UK resident son to sign. Also received detailed advice about overseas resident tax and CGT. Hopefully we will have 'time' to sort out a plan to minimise tax which would only be possible if there's no sudden death. A couple of items may cause surprise. I didn't realise that children under 18 cannot receive cash from a will but is managed by the Executors until they turn 18. Given one is not a year old yet then hoping that won't be an issue. . Sons have had a few 'gulp' moments but assured them this will mean we will be bothering them until we turn 100.

 

[cove]

Our family lawyer is retiring on 30th June so we are getting some documents certified and 5 year leases with options signed shortly. Having the temerity to pull the plug at 75 is something we have to accept.

 

[Pushka]

Our family lawyer is retiring on 30th June so we are getting some documents certified and 5 year leases with options signed shortly. Having the temerity to pull the plug at 75 is something we have to accept.

Our original lawyer has long gone, as has his successor as I found out recently. . The original lawyer has the practice named after him and it's been around for decades. Obviously. Now we have a new breed lawyer with funky bun and looks younger than our grandchildren. A lovely guy and very thorough and thanked us for being such nice clients. He said he was having a horrible next day with troublesome clients.