We recently had a phone call from a close relative of a long term client. John (we’ll call him) had been referred to us for advice, as he had just unexpectedly received a large, life changing amount of money ($650,000).

He had been googling about investments, and had already mostly decided how he was going to invest his windfall. He was just ringing us because our client had heavily pushed him to do so. There was something not right about what John was saying on the phone. I don’t normally do this, but in this case, John actually worked at a place that was on my way home, so I offered to drop in that afternoon. Luckily our instinct in this case was right.

John was about to give his whole windfall to a group conducting quite a sophisticated scam. Between my assistant Michael and myself, we were able to research the information John had received, and then discover news articles setting out the scam and the victims stories, which matched exactly the process John had been through with the scammers up to that point. We sent these articles to John , and disaster was avoided.

A new client who first came to us about a year ago to start planning for retirement was recently made redundant. The client was planning to retire from full time work at the end of the year, so even though the redundancy was a bit early and a surprise, overall he was just being paid, tax free, not to work for the next few months and ending up in a similar position to what he would have been anyway.

There was, however, one twist. The client emailed us just to let us know what was happening, and that he was fine with it all. We called back as we had one concern. What was the finishing date?

As it turned out, the company was going to make him redundant with a finishing day that happened to be 2 days before his 60th birthday. Our client was planning to work again in the future, but probably just more part time rather than full time, perhaps in the odd consulting role for 3 months or so. If his finishing date from this job was after he turned 60, all his Super Funds become available. He can start a tax free pension with these funds.

If he finishes work before age 60, the Super Funds , in his circumstances, would not be available.

We were able to point this out and suggest he talk to his managers and payroll about delaying his finishing date by 2 days. The employers agreed to this, and now he has just received his first 2 fortnightly tax free pension payments from his Super Fund.

We have been speaking to the son of a couple where his Mum has gone into Care while his Dad remains in the family home. The son is managing their finances as the Dad is not really capable of this at this stage. We have been through the usual processes of showing the son how the costs of Aged Care are calculated, setting out how much it is all going to cost, and showing him how his parents can pay for it.

In this case the parents were not on the Age Pension as they had too many assets to qualify. We were able to show the son that if the parents used some of these assets to pay the full RAD (Refundable Accommodation Deposit), then they would qualify for Age Pension payments of around $800 per fortnight each ($42,000 per year). These age pension payments will go a long way towards making the Mum’s care costs affordable.

So far, this is fairly normal around what we do with Aged Care advice. The interesting thing about this case is that the son is quite capable around dealing with modern bureaucracy as part of his normal day to day job, so we agreed that in order to save costs for his parents (we charge by the hour), he would deal with Centrelink instead of using our services to deal with Centrelink. We said and it was agreed, do as much as you can yourself, and then just run it past us before lodging and we will quickly check it and point out anything that might need adjustment, then let us know what Centrelink comes back with, and we will help you through it.

The client’s son did a good job in applying for the Age Pension and completing the Centrelink Forms so that Centrelink can calculate the Aged Care Means Tested Fee. That was 3 months ago. He just finally received notification that his parents have qualified for the Age pension this week (mid October 2022), with a back pay of around $5,000, but the Centrelink numbers were still wrong. We have had many emails (26 at last count) and phone calls between us over this time and the son has been tearing his hair out.

If there was ever any doubt, this has been a reminder that dealing with Centrelink, which is routine for us, is a mind numbing, follicle removing experience for most people.

Jill* is a long term client. She started work for a large organisation straight out of school, and was there for almost 20 years before taking time out to raise her young family.

After an unfortunate divorce, Jill found herself underqualified, back in the workforce, with a mortgage, 4 kids at home, and not a lot of spare cash. This has gone on for many years with Jill financially managing, but always being close to the edge of having enough funds to make ends meet.

In the meantime, she has a substantial Super Fund balance due to the excellent Super contributions paid by her early employer for the 15 - 20 years straight out of school, and the growth on these Funds since.

Since she couldn't touch these funds until retirement, Jill was in the classic position of being asset rich and cash flow poor.

In May this year, Jill turned 60 years old. She was still working full time, and wanted to keep working. This means that she can't take a lump sum withdrawal from her Super.

However, she is able to start what is called a Transition to Retirement pension. This involves moving from her current XYZ^^ Super Fund to the XYZ Pension Fund.

Transition to Retirement pension funds can be started once you reach what is called preservation age, even though you are not retired, whereas the most common type of pension fund (account based pensions) can't be started unless you are retired.

One of the rules of Transition to Retirement pensions is that you can't take out lump sums, you can only take a pension, which can only be an amount up to a maximum of 10% of the balance of the fund per financial year. Once you are over 60, these pension payments are tax free and do not form part of your taxable income.

In this case, we could take $75,000 out in the period between Jill turning 60 in early May 2023, and the end of the financial year on 30 June 2023, and then another $65,000 in July 2023 (a new financial year).

The result was that by the end of July, Jill had received $140,000, tax free, from her Super, and used that $140,000 to pay off the mortgage that has been hanging over her head for the past fifteen years. She now fully owns her house and doesn't owe the bank anything. Jill has also begun Salary Sacrificing back into Super using some of the freed up $13,000 per year cash flow that comes from her not having any more mortgage payments. This is saving her tax on her wages, while also starting to rebuild the amount taken out of the Super Fund.

Jill is so relieved to have had that living on the edge feeling taken away from her, that feeling of wondering all the time whether she will have enough to cover the next mortgage payment, the feeling that one or two unexpected expenses could derail her.

She also has a better overall balance in her financial affairs, because even after taking the $140,000 out of Super, she still has enough in there to meet her eventual retirement needs when she is ready to stop work, she just now also has the ability to relax a little about daily and month to month expenses.

Overall, a very happy result.

*Not her real name.

^^ Actual Super fund name withheld so as not to distract – pretty much applies to any Super Fund.

Catherine* was referred to us last year. She is in her late 80's, single, had sold her home, and was living in rental accommodation on a 6 month lease until she sorted out where she was going to live next.

Catherine was looking for advice on what to do with the proceeds of her house sale until she bought the next property, and how to make sure her Age pension would not be affected. We helped her with that, but as part of the process she mentioned that she was also going to be receiving an inheritance from her son's Super fund.

Her son had unfortunately passed away about a year before.

I mentioned that the payout from the Super Fund could be problematic. Catherine then started to tell me about her solicitor, who wrote up the son's Will when his doctors effectively told him to get his affairs in order, and who was supposed to be sorting out the claim from her son's Super fund for her, but was strangely seeming to take a long time about it.

I explained the likely problem. Basically, Super funds are very unlikely to pay out a death benefit directly to a parent. The law doesn't allow it, except for in two cases:

• The parent is financially dependent on the child, or

• The parent and the child are in an interdependent relationship.

To be in an interdependent relationship, you need to meet the following criteria:

• have a close personal relationship;

• live together;

• one or each of them provides the other with financial support; and

• one or each of them provides the other with domestic support and personal care.

Catherine was not and never had been financially dependent on her son, and she most likely didn't meet the interdependency criteria although there was a marginal possibility, she might be able to convince the Super Fund that she was in an interdependent relationship, because they obviously have a close personal relationship, she did move in with him for the last months of his life and care for him, and she had helped him out with a house deposit many years before.

It is not what is really meant by an interdependent relationship though.

Catherine asked what would happen if the Super Fund couldn't pay this amount to her?

In this case, the Super Fund would instead pay the amount to the Estate. I asked what her son's Will says.

Catherine answered that the Will says that all the assets from the Estate go to her son's sister (Catherine's daughter). I asked what the relationship was like with her daughter. She said that they were going through a rough patch and not really talking to each other, unfortunately. The daughter lives overseas and was perhaps closer to her father (Catherine's ex-husband) than to Catherine.

The son had never married, was not in a relationship, and had no children. It seems clear that the son wanted his Mum to have the Super, and his sister to have his remaining assets.

When he met with the solicitor to draw up his Will, the son showed the solicitor the Super Fund Annual Statement, which showed his mother nominated as the direct Beneficiary of the Fund should he die. The solicitor took that as done, and drew the Will up so that all the other assets go to the sister. Frankly, I think the solicitor should have known and understood the law around Super Funds better, but when he is looking at a Super Fund statement that says the Mum is the beneficiary, you can see how this mistake could happen.

What has been the outcome?

After a long drawn out process, with the solicitor compounding his initial mistake every step of the way, the inevitable outcome has finally occurred. The Super Fund recently paid the benefit to the Estate. The Estate then has to pay tax on this benefit, then distribute the after tax proceeds to the daughter.

Fortunately, the daughter has agreed to then just give this money to her mother.

In the meantime, the loss of her son has been compounded by two years of unnecessary angst and constant reminders and reliving of her son's passing while her solicitor dragged her through the process of trying to prove to the Super Fund that the money should go directly to her, when there was really very little chance that was ever going to happen.

In some ways, this is an unusual case, but in others, not so much. There is, at best guess, at least a million Super fund accounts in Australia that nominate their parent or parents as beneficiaries, and the nominees have no idea that there is virtually no chance that these wishes are ever going to be followed, should the worst happen.

It is a flawed system, but that is the current law.

For all our existing ongoing clients, we ask to see their Wills (only once they are ready to trust us enough to show us this sort of information), and we advise on and set up their Super Fund death benefit nominations. In this way we can intercept these sorts of really poor experiences for our clients and their families.

Once the time comes, we also guide our clients through the process of accessing money from Super Funds after the death of a loved one. Sometimes it is smooth, but we also know from experience that sometimes it is very difficult, particularly if it has not been planned for properly, as in this case.

We really don't want to see anyone else having to go through the anxiety inducing experience that Catherine has had to endure over the last couple of years.

*Not her real name