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Keith & Nicole – binding death benefit nominations for blended families

Date: 1 November 2017

Keith and Nicole are both divorced and have children from previous marriages. Nicole’s children, Connor and Isabella, come to live with Keith and Nicole after they get married. After a near miss during a special effects mishap for his latest film clip, Keith decides that he had better get his affairs in order. Keith has a healthy member balance in his superannuation fund and decides that he would like his death benefit to go to Nicole in the first instance. In the event that Nicole pre-deceases Keith, he would like his death benefit to be split equally between their children (including Connor and Isabella) – since a ‘child’ includes step-children for these purposes and children are classified as ‘dependants’ who are eligible to receive death benefits.

Keith is surprised to discover that the ATO view is that a step-child will cease to be a dependant of a step-parent upon the death of the natural parent. Therefore, if Nicole pre-deceases Keith, Connor and Isabella will no longer be considered Keith’s step-children and they may no longer be eligible to receive his death benefit (unless they are otherwise financially dependent on Keith). To avoid any risk of an invalid nomination, Keith’s wishes could be achieved by directing the death benefits which would otherwise be paid to Connor and Isabella into his estate. Keith’s will could then provide for these amounts to be distributed to Connor and Isabella.

Partner Paul Williams practices in taxation law and estate planning. The Tax & Estate Planning Team offers the ideal mix of legal, tax and accounting skills to ensure that your testamentary documents achieve your estate planning objectives.

 

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