In a recent interview with The Australian newspaper, Suzanne Jones, Head of Estate Planning at Coote Family Lawyers, discusses superannuation tax changes and estate planning for blended families.

As written by The Australian, the most significant superannuation tax change in a decade could create messy inheritances among the nation’s wealthiest families, potentially forcing children in blended families to foot the tax bill for a stepparent’s windfall. 

While the Australian Bureau of Statistics reports that roughly 12 per cent of Australian households are blended, this figure only counts families with children still living at home.

For the Baby Boomer generation, grey divorce rates are on the rise, with couples calling it quits in one in three first-time marriages.
 
“In my 40 years of practice, I would estimate that one out of the three families I see are now blended, which is much higher than 12 per cent,” said Coote Family Lawyers head of estate planning Suzanne Jones.

With the $3.2 trillion intergenerational wealth transfer under way, the presence of blended families plus the new super tax creates the makings of a highly litigious cocktail. 

Under Australian law, when a member dies, any superannuation balance exceeding the surviving spouse’s transfer balance cap must be paid out of the superannuation system. 

Ms Jones said estate planning lawyers would have to be very aware of what the net outcome from spouses and beneficiaries of the estate would be. 

“They will need to consider if adjustments are needed to take into account the tax payable on the super death benefits and embed a formula in the will to accommodate any adjustments,” she said. 

“It may also mean that distribution of estates has to be delayed while the tax is assessed and or where the estate and superannuation are to be divided between a surviving spouse and children of another relationship." 

“The super may have to be directed to the estate with a well-drafted clause empowering the executors to firstly apply as much of the superannuation death benefit as is possible to satisfy the entitlement of the surviving spouse who will bear the lesser tax burden.”

You can read the full article in The Australian here: New super tax may spark inheritance fights in wealthy blended families.

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