In the realm of financial planning, protecting, and maximizing wealth for future generations is a key concern. Recently, we had the privilege of assisting our retired clients, Bob and Sarah, in safeguarding their legacy by implementing crucial super and pension re-contribution strategies. Through these measures, we successfully saved their children from potentially paying a staggering death benefit tax amounting to $145,000. This achievement exemplifies the value of comprehensive and proactive strategic planning.
By carefully evaluating their financial circumstances, we identified the potential tax burden that could be passed on to their adult children upon their passing. Through specific super and pension re-contribution strategies, we restructured their assets in a tax-efficient manner, mitigating the impact of the death benefit tax. This not only provided significant financial relief for their children but also ensured a smoother transfer of wealth for future generations.
At Bentleys Wealth, we understand the importance of preserving your hard-earned wealth and ensuring that it benefits your loved ones in the most efficient and tax-effective manner. That’s why we meticulously analyse your financial situation and leverage various strategies to maximize the value of your superannuation benefits and minimize tax implications for your beneficiaries upon your passing.
So, how did we achieve such significant tax savings? Let’s delve into the details:
1. Understanding Death Benefit Tax Exempting
We thoroughly assessed Bob and Sarah’s superannuation benefits and identified the tax-free component, which encompasses contributions made using after-tax income. This component is exempt from tax when paid out to eligible beneficiaries. The taxable component contains everything else, i.e. all deductible contributions plus growth received by the fund, so this component changes every day.
2. Strategic Financial Planning
By devising a comprehensive financial plan tailored to their unique circumstances, we ensured that their superannuation benefits were structured in a tax-efficient manner. Our team reviewed their contributions, earnings, and other financial assets to maximize the tax-free component and minimize the taxable component of their superannuation benefits.
3. Beneficiary Nominations
Bob and Sarah didn’t have any beneficiaries nominated and with the changes being implemented, we will ensure that they put reversionary pensions in place. The main benefit of a reversionary pension is the financial security it offers the beneficiary. If Bob were to pass away, Sarah will continue to receive regular pension payments from his pension without interruption. This can provide a stable income stream and help ensure financial stability for the Sarah, as this is their primary income source.
As a result of our efforts, we were delighted to show Bob and Sarah that their beneficiaries will now be able to receive the superannuation benefits without incurring approximately $145,000 in taxes – depending on when the funds are passed to the children. These remarkable tax savings highlights the value of proactive financial planning and leveraging the benefits of death benefit tax exempting.
In addition to addressing the tax implications, we took a comprehensive approach to their financial well-being. Recognizing the volatility of the market, we conducted a thorough review of their investment allocation. It was evident that their current portfolio carried an excessive level of risk, which could potentially jeopardize their retirement plans.
To strike a balance between income generation and risk management, we adjusted their investment allocation to a more balanced approach. This prudent adjustment allowed them to achieve their desired income without exposing their capital to significant declines in volatile market conditions.
Overall, the combined efforts of implementing tax-saving strategies and optimizing their investment allocation has fortified Bob and Sarah’s financial security and preserved their legacy through tax minimisation. By addressing potential pitfalls and embracing strategic planning, we have provided peace of mind, enabling them to enjoy their retirement years with confidence and the knowledge that their children are protected from unnecessary taxes, and that their portfolio is structured in an optimal manner.
We believe that your financial well-being and the financial security of your loved ones are of paramount importance. We are ensuring that our clients financial plans remain aligned with their objectives, while also adapting to any changes in legislation or personal circumstances.
If you have any questions or would like to discuss any further financial planning opportunities, please do not hesitate to reach out to Bruce Grieve. Bruce is always here to assist you and provide the guidance you need to make informed financial decisions.