Dealing with stepchildren in super

By Julie Steed, Technical Services Manager
An issue that arises in blended families is in relation to stepchildren. Stepchildren are included in the definition of a child, however the step-parent/child relationship is severed upon the dissolution of the natural parent’s relationship with the step-parent. This often happens as a result of divorce or death.
The severed relationship between step-parent and children has long been a principal in family law and was recently confirmed as the case for superannuation death benefits in ATO ID 2011/77. The Superannuation Complaints Tribunal (SCT) has also used this principal in deciding cases.1
This means that the step-parent is unable to leave their superannuation benefits to their stepchildren since they no longer will meet the definition of a child. The children may however still qualify under financial dependency or interdependency.
An alternative is for the step-parent to formally adopt the stepchildren. If this occurs, the stepchild becomes a legally adopted child, who then has all of the legal rights and entitlements of a natural child. However, in practice this formality is rarely undertaken. It is particularly difficult in the event of a second marriage where the natural parent will generally object to their child being adopted by another person. It is more likely where one of the natural parents has died and the surviving parent remarries, although it is still uncommon.
Where there are blended families, the interaction between superannuation death benefits and careful estate planning becomes all the more important in order to ensure that the family’s wishes are able to be fulfilled.
Case study
Andy and Jill married many years ago and each have two children from previous marriages, Mandy and Candy and Bill and Phil. Andy and his first wife had an acrimonious divorce. Jill’s first husband died shortly before the birth of Phil.
estate affairs
Andy and Jill have made life long commitments to each other and to each other’s children. It is Andy and Jill’s wish that if one of them dies, the other inherits everything but on the death of the second of them, all assets are divided equally between their four children.
Andy and Jill visit their financial planner who runs through the different scenarios, before calling in an estate planning specialist.
Andy and Jill have the following assets:
Ownership Asset Value
Joint Family home $600,000
Joint Shares $150,000
Joint Cash $50,000
Andy Superannuation $200,000
Jill Superannuation $30,000
Jill Death benefit pension from Jack $600,000
Total $1,630,000
What would happen if they both passed away now?
Assume Andy and Jill were both involved in a serious car accident. Jill died at the scene and Andy died in hospital six weeks later. If they both died without a Will and without superannuation death benefit nominations, the following is the best outcome that could be obtained.2
As Jill died first, her share of the jointly held assets will generally pass to Andy due to the right of survivorship. Upon Andy’s death, all of the jointly held assets will pass to his children. Andy’s superannuation could pass 50 per cent to each of his children ($100,000 each) but none could pass to Bill and Phil as the death of Jill has severed the step-parent/child relationship.
The only way Bill and Phil could receive any of the superannuation benefit is if they were financially dependent or in an interdependency relationship with Andy. The same applies to Andy’s children in respect of Jill’s superannuation and this means her superannuation will be shared equally between her children. Assuming that the children were not living at home and not dependent, the distribution would be as follows:
Child Amount received 3 Calculation
Mandy $500,000 ($600,000 + $150,000 + $50,000 + $200,000) divided by 2
Candy $500,000 ($600,000 + $150,000 + $50,000 + $200,000) divided by 2
Bill $315,000 ($600,000 + $30,000) divided by 2
Phil $315,000 ($600,000 + $30,000) divided by 2
Total $1,630,000
What if some of the children were financially independent?
The situation is further complicated if one of the stepchildren was financially dependent and the other was not.
Consider the scenario where Candy was the only child living with Andy and Jill. Candy would qualify as being in an interdependency relationship with Jill and although the step-parent/child relationship is severed, Candy is eligible to receive one third of Jill’s superannuation.
Child Amount received3 Calculation
Mandy $500,000 ($600,000 + $150,000 + $50,000 + $200,000) divided by 2
Candy $710,000 ($600,000 + $150,000 + $50,000 + $200,000) divided by 2 and
($600,000 + $30,000) divided by 3
Bill $210,000 ($600,000 + $30,000) divided by 3
Phil $210,000 ($600,000 + $30,000) divided by 3
Total $1,630,000
Even if Andy and Jill had death benefit nominations in place to request 25 per cent to each of the four children, the superannuation fund trustees would be unable to make payments to the stepchildren of Andy and Jill since that relationship is severed upon their death. The stepchildren could only qualify if they were financially dependent or in an interdependency relationship.
Andy and Jill’s adviser calls in an estate planning specialist who structures their affairs to ensure that their wishes are met in the most efficient and tax-effective method which will also provide protection for any children whilst they are minors.Testamentary and superannuation proceeds trusts are established via the Will and binding death benefit nominations put in place.
Conclusion
The examples above highlight how the severing of the step-parent/child relationship can result in outcomes that may differ from your client’s expectations. It is essential to update client’s estate plans, including superannuation, as family circumstances change and to utilise the services of experts who can assist with designing the desired outcomes.
1 SCT determination D04-05/186 and SCT determination D99-2000/082.
2 The intestacy laws vary in each state.
3 Before the effect of any superannuation tax has been accounted for.

Letter To All Christians

Letter To All ChristiansI think this post is worth sharing.
My personal opinion is that people who kill in the name of their deity are using their deity’s name in vain.
Power seeking murderers hide behind the veil of religious righteousness because they are not courageous enough to admit their true evil intentions and know they will attract more followers by espousing a spurious cause.
Ultimate love does not demand the slaughter of innocents.
Strong people build others up.
Cowards seek to diminish the power of others and destroy them.
Only tolerance and peace will bring about tolerance and peace.
Until that is the norm, think good thoughts, speak well to and of others, do good deeds but be prepared to defend your freedoms against those who would unjustly take your property or life.

Help Save The Bees

Bayer has just sued the European Commission to overturn a ban on the pesticides that are killing millions of bees around the world. A huge public push won this landmark ban only months ago — and we can’t sit back and let Big Pesticide overturn it while the bees vanish.
Just last month, 37 million bees were discovered dead on a single Canadian farm. And unless we act now, the bees will keep dying by the millions. We have to show Bayer now that we won’t tolerate it putting its profits ahead of our planet’s health. If this giant corporation manages to bully Europe into submission, it would spell disaster for the bees.
Please join me in signing the petition to tell Bayer and Syngenta to drop their bee-killing lawsuits now.
http://action.sumofus.org/a/bayer-bees-lawsuit/?sub=mtlm5
Thank you”.
BACKGROUND:
Colony collapse disorder (CCD) — the sudden and massive die-off of honeybees — has emerged as one of the most mysterious ecological disasters of the past several years, and one of the most expensive. Around the middle of the last decade, commercial beekeepers began to report that colonies of bees were collapsing without warning, with death rates approaching 30 to 90% of a hive. Even stranger was the behavior of bees in an afflicted colony — worker drones would simply fly away, abandoning their hives and queen to simply die alone in the open. Beekeepers have struggled to adjust, and costs of commerical pollination for crops have soared.
About 130 crops in the U.S. — worth some $15 billion a year — depend on honeybee pollination, and if bee populations really did collapse, it would mean an agricultural catastrophe.
That’s why scientists have been working overtime to figure out just what might be causing CCD. New research by a Harvard biologist Chensheng Lu, in a new study to be published in the Bulletin of Insectology, points the finger at the pesticide imidacloprid, a chemical often used on corn plants. Honeybees are now fed with supplements of high-fructose corn syrup — and if Lu is right, we could be killing the bees ourselves. “We’ve actually isolated a single risk factor for CCD,” says Lu. “We really need to be looking at this data.”
Read more:
New Research Connects Bee Colony Collapse Disorder to Pesticide | TIME.com http://science.time.com/2012/04/11/whats-the-buzz-study-links-pesticide-with-honeybee-collapse/
Why Should We Care?
The impact honeybees have on the human population and the environment is far more crucial than we may think. Agricultural crops rely on honeybees worldwide to provide them with life and guarantee their reproduction. Bees facilitate pollination for most plant life, including well over 100 different vegetable and fruit crops. Without bees, there would be significantly less pollination, which would result in limited plant growth and lower food supplies. According to Dr Albert Einstein, “If the bee disappears from the surface of the earth, man would have no more than four years to live. No more bees, no more pollination…no more men”. Bees’ eradication affects us more than we may think.
Interesting fact:
Bee pollination actually accounts for approximately one-third of all of our food supply. In fact, many of the country’s crops would not even exist without bees.
ALSO SEE:
www.AdoptaBeehive.com.au
A GLOBAL BEE CRISIS …
Worldwide, the global bee population is in serious decline. This phenomenon is known as CCD (Colony Collapse Disorder), with an increasing number of bee hives collapsing and many bee species becoming extinct or threatened.
If this disturbing trend continues, it could lead to a global food crisis due to the vital pollination role that bees play. Honeybees are responsible for pollinating around 80% of fruit and vegetable crops so this threat is not only affecting bee populations, but also critically impacting our farmers and food supply.
Bee fruit tree blossom
Scientists and concerned beekeepers around the world are finding more evidence of the contributing causes of this serious situation. Studies and research now suggest that there are multiple factors affecting the demise of our precious honeybees including chemicals such as Neonicotinoids used in agricultural crops; use of pesticides, herbicides and fungicides; beekeepers using antibiotics in the hive; genetically modified crops; pests and diseases; electro magnetic radiation; Microwave interference; monoculture farming practices; artificial feeding; malnutrition and the list goes on.