Starting a Death Benefit Pension

In this article, we will guide you through different steps and learnings as per below;

Why Start a Death Benefit?
Entering Deceased Date
Starting a Reversionary Death Benefit Pension
Starting a Death Benefit Pension
Pension Commencement Reports

Why Start a Death Benefit?

When an SMSF member has died, the surviving SMSF trustees must continue to comply with the relevant super and tax laws for paying out death benefits.

A death benefit payment is generally made by the SMSF to another person because of the death of a member of the fund. A super death benefit may generally be paid either as an income stream or a lump sum.

Income streams are usually either a new income stream that is paid to a dependant from a deceased member's accumulation account (Death Benefit Pension) or a reversionary income stream that is the continuation of an existing income stream and paid to a dependant (Reversionary Death Benefit Pension).

Ensure you run a Period Update to the day before the date of death, e.g. if Date of Death is 01/01/2019, then the Period Update date would be 31/12/2018

Entering Deceased Date

You must enter a date of death for the deceased member before you start any processing.

Navigate to Fund Level > Members > Browse Members

Select the Member
Enter the Date of Death
Click Submit

Starting a Reversionary Death Benefit Pension

The name of the reversionary pension beneficiary must be added after Richie's pension account has been created and before using it to commence a reversionary pension. In this example, Ellyse Perry must be added to Richie's pension as the reversionary pension beneficiary in the Pension Details tab.

Before starting:

Ensure you run a Period Update 1 day before the date of death of Richie
Ensure you enter the Date of Death 01/07/2018

Navigate to Fund Level > Members > Browse Members

Select the relevant Richie's Pension Account (which is going to be reverted to Ellyse)
Click Edit
Click View Establishment Details: If the pension was established on Class the button will be called View Establishment Details if the pension was established previously (before the fund was loaded to Class) and loaded as part of the opening balances it will be called Maintain Establishment Details as the condition of release can be entered.
Click on the Pension Details Tab in Richie's pension
Enter Ellyse's name as the reversionary beneficiary in Richie's pension
Click Save
Navigate to Members > Browse Members and click Add New Pension for Ellyse
Select the member Ellyse
Select the type of pension
Enter an account description
Enter the pension start date as Richie's date of death
Click Activate
Click Establish this Pension Account
Select Revert from Existing Pension as the type
Select the pension account you are reverting from Richie to Ellyse
Click Next
Review the Pension Purchase Price
Click Submit

This type of benefit is paid to a dependent from a deceased member's accumulation account balance, as it is not a continuing pension from the Deceased member. The Deceased member's pension account needs to be commuted to the Deceased member's accumulation account first. Then you can establish a Death Benefit Pension for the surviving member from the Deceased member's accumulation account.

Before you start:

Ensure you run a Period Update
Ensure you enter a Date of Death

Navigate to Members > Browse Members > Add New Pension

Select Member
Select Pension Type
Enter Account Name an account description
Enter Start Date the date the account commenced
Click Activate
Click Establish this Pension Account
Select Establish Death Benefit Pension as the type
Select the member account from the drop-down menu (If this is blank check that you have entered the member's date of death)
Click Next
Enter Percentage of the account balance you are using to start this pension, e.g 100%
Click Submit