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When one member of a couple passes away, the deceased spouse’s superannuation benefits effectively become death benefits that are received by the surviving spouse. This death benefit is received either as a lump sum or as an income stream.
If the surviving spouse receives the death benefit as an income stream, they need to be careful not to exceed the transfer balance cap (TBC).
With the recent indexation changes to take place from 1 July 2021, let’s have a look at how a death benefit will impact the surviving spouse’s transfer balance cap (TBC).
Finding the best strategy
The interaction of death benefits and your TBC can be complex. Some of the factors that need to be evaluated before making any decision about what to do with a partner’s death benefits include:
- Surviving spouse’s personal transfer balance cap amount
- Unused portion of the cap
- Deceased spouse’s death benefit amount
- If there are any life insurance proceeds in the death benefit
- If the deceased spouse’s pension was reversionary, then the value of that pension
- If the death benefit is a defined benefit income stream, then there are special rules to deal with that kind of a pension.
Due to this complexity, we strongly recommend you seek independent financial advice. A professional adviser can help you navigate the rules at what is bound to be a difficult time and find the best financial solution for your circumstances.