For some families, one overlooked advantage of reversionary pensions involves life insurance proceeds and future tax component allocation.
Why This Matters:
When life insurance proceeds are paid into a reversionary pension:
- Tax-free and taxable components may remain proportionate
In contrast:
- New death benefit pensions may allocate insurance proceeds more heavily to taxable components
Potential Long-Term Benefit:
This may reduce eventual death benefit tax when benefits later pass to adult children.
Example:
Greg and Heidi’s case on page 8 demonstrated substantial future tax savings under a reversionary strategy.
Bottom Line:
For insured pension holders, pension structure may materially affect multigenerational tax outcomes.
Reviewing Your Superannuation Estate Planning Strategy?
The structure of a death benefit pension may significantly affect future tax outcomes for spouses and adult children, particularly where life insurance proceeds are involved.
Small pension structuring decisions today may help preserve more wealth for future generations and reduce long-term death benefit tax exposure.
Visit our Contact Us page here to discuss your estate planning and superannuation options.
Disclaimer and Warning
The information above is of a general nature only. It should not be used as a source to make financial decisions. It’s also important to note that the legislation and figures related to this topic tend to change regularly and therefore the information above may not reflect the current status. We recommend that if you are looking for advice on this matter, you should contact us.