What will estate planning look like in 2020?

Looking beyond 2020, netwealth technical services head Keat Chew said financial advisers must consider the prospect of small tax increases on superannuation earnings and lump sum payments.

Speaking at a recent netwealth CPD event in Sydney, Chew took the liberty of forecasting the future of financial advice to 2020 and beyond. He reminded advisers not to be complacent, especially as the 2018 Federal Budget nears and more changes could be just around the corner.

Apart from an increase to the superannuation guarantee, further discussion around the sole-purpose test and the purchase of lifetime income streams, Chew said there's potential for a tax on end benefits (e.g. lump sums) and an increased tax on super earnings.

"It's possible over the next 10 years we could have an increased tax on the lump sums. Currently it's tax free for those over 60. If there's an increase it will likely be a small one, about 10%," Chew said.

He added such an increase could affect estate planning strategies, especially impacting the payment of death benefits to non-dependants.

What this would effectively do is tighten advisers' estate planning opportunities, as would a continued rise in the preservation age, Chew said.

As for a tax increase on super earnings, the technical services expert predicts it would be a small amount at about 5%. It could apply to contributions but it should never apply to non-concessional contributions, Chew said.

"Let's not be fearful of every dollar must be in super. It's really about the tax effectiveness. If it's still effective to be outside super then let's not worry too much," he added.

One point he did make was advisers should think more about super contribution splits.

"Accountants do well with income split, but we should also do well with super split. We should be doing it all the time," he said.

Chew added advisers could also realise capital gains more frequently, saying "we don't do enough of that."

While his 2020 predictions are speculative, Chew said there was no harm in thinking about the industry's potential direction.

Among the two-hour presentation, Chew covered off several technical topics including the current rules and potential strategies for death benefits; the UK state pension; concessional contribution caps; and income segregation and streaming.

Also speaking at the event was Russell Investments managing director of strategic business initiatives Tim Noonan. He said there needs to be a strong focus on the actuarial probability of advised clients living far longer and spending far more than projections.

Financial Standard was the media partner for the netwealth CPD event.

Read more: netwealthCPDKeat ChewFederal Budgetfinancial adviceFinancial StandardRussell InvestmentsSydneyTim NoonanUK
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