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Family trusts an alternative to super?
Clients looking for wealth management alternatives to superannuation in light of the 2016 Federal Budget changes to the system may suddenly find family trusts more attractive as it has fewer restrictions and rules than self-managed superannuation funds (SMSFs).
Such was the view of chartered accountant and financial advice firm, HLB Mann Judd, which argued further tinkering and regulation of the super system would only increase uncertainty.
The firm's wealth management partner, Michael Hutton, said that people have overlooked family trusts as a way of managing wealth as the popularity of SMSFs have risen.
"Yet family trusts have a number of advantages over SMSFs — and these advantages have increased with the budget changes — meaning they are a vehicle that may now make even more sense to manage family wealth," Hutton said.
Advantages included asset protection options, intergenerational wealth transfer, no limit on contributions to the trust and the option to increase capital, no age limits to access funds, income splitting to all family members, which may aid those who are low income earners, and estate planning flexibility.
He was concerned about several changes to the super system in the Budget, including the $500,000 lifetime limit on non-concessional super contributions compared to the current amount of $180,000, and the reduction of the concessional contribution limit for those aged over 49 from $35,000 to $25,000.
He also raised several questions about the $1.6 million pension account limit per person.
"Presumably this equates to $3.2 million for a couple. But what about the situation where one member has $4 million in super but the stay at home partner has $200,000. Is this disadvantaging that couple? Will there be any opportunity to equalise the accounts?"
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