Life Insurance Beneficiary Taxes – What You Need To Know
Australian inheritance laws differ in various states.
In September 2011, inheritance laws were updated in an effort to create a uniform succession law.
Under this provision, the executor of the estate or the will should take responsibility of taxes. However, there are certain instances when certain financial transactions may be taxable even after the death of the creator of the estate or will.
Even after a person dies, his or her estate can still continue to earn an income from interest on accounts and unpaid wages. Capital gains and share dividends will attract tax. In these instances, the relevant taxes are paid by the executor or the beneficiaries in the event that the executor has passed on.
Deceased Estate And Capital Gains
It is important to understand the life insurance beneficiary taxes pertaining to an estate and capital gains. If you are a beneficiary or legal representative, then special capital gains tax will apply. There are certain rules and provisions pertinent to the estate. When the executor of the will dies, the assets can be passed on to the beneficiary or to a legal representative.
Super Fund Beneficiary Tax Treatment
When applying for a super fund, you need to be aware of certain provisions. The benefit payment can be subject to tax if the named beneficiaries are not financial dependents. Other circumstances include; naming a beneficiary who is not a spouse or not above the age of 18. Such instances may attract hefty taxes that may go up to 16.5 percent.
Estate planning is very important because it gives you an opportunity to plan and pass on your assets to those dear to you. It is best to have the plans in place in good time. Life has many uncertainties and you could even suffer mental incapacity. You can save your kids and spouse rigorous court battles by clearly stating who gets what. Cases of children and spouses fighting for a deceased’s estate can be avoided through proper estate planning. Again, you can also minimize taxes and expenses that would be passed on to your beneficiaries.
Life Insurance Ownership
There are several options to life insurance ownership, which should be considered when taking out a cover.
Self-ownership is the most common form, and it is very easy to administer. As the name implies, the policy owner has control over the policy. Any changes or adjustments are made by one person.
This also referred to as third-party ownership. The structure in this policy allows for someone else to own your policy. This is often the case in joint couple policies, in which the spouses own each others policies. This type has its advantages and is particularly ideal for those who depend on their spouses financially. However, problems may arise in the event that you separate or divorce. Read: Finding an Appropriate Business Debt Management Plan
Via A Trust Or Company
Insurance policies can be tailored to be owned by a company or corporate identity. Businesses may choose to apply for a key person cover. This allows then to claim tax deductions on the premiums and they can also recover revenue.