In addition to providing for retirement, funds properly accumulated in a regulated superannuation fund have risk management benefits if financial adversity occurs and the person needs the protection of bankruptcy.
These benefits include:
- Without regard to the person’s age, funds properly accumulated over time in a regulated superannuation fund are protected and are not available to the trustee-in-bankruptcy; and
- If the person is at retirement age or otherwise legally able to access funds from the superannuation fund, once bankrupt, that person can safely receive lump sum monies from his or her superannuation fund and those funds are protected. They are not available to the bankrupt estate; and
- The bankrupt person can use the lump sum monies received from the superannuation fund to protect assets that would otherwise be lost to his or her bankruptcy.
Therefore Superannuation – as part of a modern integrated estate plan – can also be an effective Risk Management Tool.
Superannuation for risk management
A common stress for older people who need to become bankrupt is that they will not have time to recover from the financial adversity they have experienced.
The good news is that funds held in a regulated superannuation fund are protected and are not available to the bankruptcy estate. All debts caught by bankruptcy are permanently extinguished.
For persons near retirement age, the combination of debts being permanently extinguished by bankruptcy and regulated superannuation funds being protected can greatly assist their financial recovery.
A regulated superannuation fund has several benefits for people who experience financial adversity and are at or near retirement age.
These benefits include:
- Funds accumulated over time in a regulated superannuation fund are protected and are not available to the bankrupt estate.
- Once bankrupt, if retired, lump-sum funds properly received from the regulated superannuation fund are protected and are not available to the bankrupt estate. Further, assets purchased during bankruptcy with these funds are also protected.
- Financial recovery can commence as soon as a person becomes bankrupt. There is no need to wait till the bankruptcy is finalised in three years’ time.
It is important to maintain a money trail to evidence assets purchased during bankruptcy with funds received from the regulated superannuation fund.
Superannuation lump sum monies properly received by a bankrupt person are protected for the bankrupt person. However, this protection is only available for people who are bankrupt before they receive the lump sum.
Assets purchased during bankruptcy with protected superannuation funds are also protected where it can be demonstrated that the protected superannuation funds were used to purchase the asset.
WARNING: Superannuation funds accessed prior to bankruptcy are not protected from creditors or the bankrupt estate. It is only superannuation funds properly accessed after the person is bankrupt that is protected. Only funds accessed once bankrupt are protected.
It is typically in the best interest of persons who are experiencing severe financial adversity to be proactive and file for bankruptcy without undue delay. Being bankrupt can ensure maximum protection of your superannuation lump sum when received.
Maybe it’s time to put your affairs in order, and create a modern integrated estate plan before it’s too late?
Be cautious – we strongly recommend that no decisions be made without first obtaining professional advice.
When it comes to Wills, asset protection & estate planning in Australia, you can trust the oldest law firm in South Australia, Genders & Partners to guide you through the tough decisions you must make for your family’s future care and welfare.
If you have any questions, or would like further information, please call or email us. Would you like a quick phone call to discuss? Feel free to phone or email us or use this link and book a timeslot for a free 15-minute phone consultation on my schedule: https://calendly.com/genders
Can’t get to us? No problem. We now offer home or office visits to many areas in the Adelaide metropolitan area at no additional cost. Call us on (08) 8212 7233 to enquire further.
We can help you to protect yourself and your family. We look forward to being of service.
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