If you have a retirement pension, chances are you’ve heard of a transfer balance cap (To confirm). But how does this impact your super after you die, and how can you make sure your wishes are carried out when you die?

TBCs were introduced on July 1, 2017. The start of this fiscal year marked the first time the TBC (originally set at $1.6 million) was pegged. This means that not everyone now has a TBC. Indexing increased the TBC to $1.7 million, but most importantly, this does not apply to everyone and will depend on your situation. It is important, if you are receiving a pension, to check your individual TBC and seek professional advice if you are unsure or have any questions.

What exactly does the TBC do?

TBCs impose a limit on the amount of capital you can transfer to the retirement phase of the super.

Crucially, from an estate planning perspective, this also impacts what happens to your retirement pension when you die. The TBC applies to pensions paid to your dependents after your death (known as death pensions or survivor’s pensions) and this is where it can wreak havoc on your estate planning if not carefully crafted. .

When thinking about TBCs, here are some of the important things to consider when planning what will happen to your super after you die.

Should your death capital be paid out in the form of a death capital annuity?

If this is the case, you will need to consider not only your own TBC for the reasons above, but also the TBC of the beneficiary of the death capital pension. This will affect the amount that can be paid to them as a death benefit. Excess amounts must be paid in lump sums which may affect the amount of money kept in the super environment.

There are a variety of special rules that:

• the time frame in which the survivor’s pension is taken into account in the new beneficiary’s TBC and the differences between the way in which survivor’s and non-survivor’s pensions are taken into account in the new beneficiary’s TBC;
• have the effect of modifying the TBC of a child beneficiary of a death benefit pension so that his individual TBC is not exhausted following such a benefit.

Among other things, we recommend that Trustees have their SMSF Trust Deed revised to allow for maximum flexibility when dealing with matters such as:

• to confirm ;
• death benefits;
• children’s board; and
• survivor’s pensions.

You should also consider undertaking a review of all binding death benefit appointments to ensure your super is treated appropriately upon your death.