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Death Proceeds and the Benefits of a Special Trust

The unfortunate death of a husband or wife or partner is a traumatic event. The stress of this loss can last for years especially when there are young children/dependants to care for and educate up to age 25 if full time students etc.

Fortunately, many superannuation accounts have attached Life Insurance, disability, trauma and income replacement which can help care for the dependents left behind when a parent dies. These proceeds are generally consolidated within a superannuation account. Stand-alone Insurance policies can also provide special benefits for children/ dependents.

A super fund member’s non-lapsing binding nomination can name a spouse and children. Should the children not be nominated there are other options to be researched and considered. A legal professional would be needed to structure a special trust to cater for the use of part or all of the deceased proceeds from super and/or an insurance policy, a possible stand-alone insurance policy and other sources pending research under rules at the time.

A special trust can offer tax benefits for income paid to dependants which in turn assists the surviving parent to split income and save tax on their income needed to raise the children.

The long-term treatment of the trust/s may have different scenarios which is all part of the research needed prior to putting this option and structure in place.

Guidance for this is strongly suggested to assist in the strategy and structure. A close family member may also be involved for support. This is especially important when the surviving parent is already under the stress of losing a spouse or partner not to mention looking after dependants.