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Hi,
I have a situation where husband who was 41 sadly pased away September 2021, and what the client has done is process it as an internal death benefit rollover straight to the spouses accumulation. I am fairly sure it needs to be either a death benefit pension or a death benefit lump sum.
Pension - What if they elected it to be a death benefit pension then as it turns out no pension payment has been made in the 2022 FY, would this then mean you qualify Reg 6.17 and the penison becomes accumulaiton and on we go?
I think this seems to be an easy workaround and it wouldn't work like this?
Lump Sum - If we make it a death benefit lump sum they may now have liquidity issues, under this scenario though they proposed to journal the lump sum out and journal NCC in but I see an issue under TR 2010/1 Paragrpah 160 as you can't journal a contribution such as this. Cash would need tp physically be paid correct?
Thanks
CV
Hi CV
Yes, I agree a death benefit from a Fund has to be paid to a dependant as either or both a:
1) death benefit pension
2) death benefit lump sum payment
An option may be to commence a death benefit pension on 1 July 2022.
If the death benefits have not been correctly paid there would be a breach of SIS Reg 6.17.
Since 1 July 2017 if a death benefit pension is commenced it cannot be commuted and rolled back to accumulation mode.
There would be no ability to do a death benefit lump sum payment as a journal entry and take up a corresponding non concessional contribution amount. A lump sum payment could be done by cash or by an in-specie transfer of the asset.
The Trustee needs to get professional advice as to what their options are to make sure they comply with SIS and the Fund's trust deed.
Thanks
SMSF AAA