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"To be legally brain dead, all functions of both the upper and lower brain must cease. Because the heart will fail on a brain-dead person, certification of death by brain-death criteria will be needed when the dead person's body functions are being maintained by an artificial ventilator."
Why Talk about death now?
We at trustdeed.com.au had two days of fun time at The Institute of Chartered Accountants National SMSF conference where we had the good fortune of meeting some of our customers for the first time. When you are an online only business - you usually find that your customer have used your services, only when their credit card appears on your cloud merchant summary system which is after they have paid you.
My interest was not only to sponsor this event and further the SMSF cause, but also, like others, to crank up my CPD points. And whilst I was there, I had the opportunity to catch with other professionals and understand what they are thinking in 2014 of the world which we call "SMSF".
It was interesting to note that all of us are now talking about the same things. It's all about "How to take money out of Super, pensions, death & estate planning" with bulk to strategies on how to pass on assets to the next generation in a low tax environment - basically estate planning.
Please visit our current seminar page https://www.onlinesmsfaudit.com.au/SeminarBooking.aspx to note the contents and at the CA conference Julie Steed of AET spoke about "SMSF Death Planning Strategies", Tim Miller of Cavendish spoke about "Helping your clients build a retirement and post retirement asset", Jemma Sanderson spoke about "Pensions - What the latest?" and Peter Bobbin told us "Where should focus be?" and that's in advising and not number crunching, because books will be done by mostly by machines.
I do not know if it was the age of the speakers, who are probably themselves thinking of retiring and commencing a pension or thinking of dying one day, and thinking how their wealth will move to the next generation in a nil tax way, like I do, which prompted them to pick these topics, but the reality is now that there are so many new SMSF's as our clients, members, our clients, are going to die on us and we, as advisors, need acquire new skills to help their families to take care of their SMSF's once our clients die.
DEATH stops many things in SMSF and triggers many other things. It stops the member account for instance and vests the entire balance upon to the trustee, to manage and distribute to the deceased member beneficiaries as per their wishes in their nominations. And if the member is in pension phase, stop the pension and then either pay a lump sum or a pension to the deceased dependant beneficiary. Note: there are many tax issues on death which must be considered before making any quick decisions and that is what estate planning is all about.
The question on death itself is quirky, firstly we need to consider, can beneficiaries decide when the member can or should die, I mean, in most cases the member may not be in a capacity to make that final decision. So can death be postponed by the beneficiaries till all the tax matters are resolved?
After all, death itself triggers a few things, if time of death can be controlled, and then hopefully, there could be a better tax outcome. Many tax problems happen due to untimely death, so if death can be stopped or say "put on hold" or "timed" till such time all matters are first resolved? We as advisors will get that extra time, which we need to theoretically be more tax effective for the beneficiaries.
Death strategies
What is death, and when should you actually die (at least legally) should be questioned. Is it possible for the member, not to die (at least legally) and the fund to continue paying a pension to the member, albeit withdrawn by the adult dependants and enjoy its tax free mode who will other wise pay 17% tax on taxable component of the death benefit lump sum payment of the member.
Think of this example, father died, reverted pension to mother, the fund has $10M in assets, all properties, which return 10% income - two adult kids, Mother is in hospital, who is half brain dead, all the money is in super is taxable component. If super is paid upon death, the two kids will pay $1.7M in tax and that money will come out of the super system.
If somehow, if we keep mother alive for say another 9 years and then withdraw and re-contribute for 4 people - 2 kids and their spouses - $1.08M each then it could be possible that the $10M worth of properties could stay within super and lump sum death benefit tax be avoided.
Which means $2.16M can come out as a pension payment for the mother and go back in as non - concessional contribution, for every three years and funds property can become kids fund property and the fund becomes a intergenerational fund. But to make this strategy work, you will have to keep mum alive for 9 years, till you pull out all the monies and recon tribute and continue the reversionary pension?
NB: In this example, the advisor should have considered section 17A of SISA, that SMSF's can have only four members. This means for this strategy to work effectively, if your client has three kids, they must have three SMSF's. Imagine, if properties are paying 7% return in 2014, this return could be 70% on cost when your kids are withdrawing pensions on this income about 30 years later when they retire.
How do you legally die?
Legal definition In Australian law: death is generally defined as either irreversible cessation of circulation of blood in the body of the person or irreversible cessation of all function of the brain of the person. This definition applies to all states except Western Australia, which has no statutory definition of death.
Brain death (irreversible cessation of all function of the brain) means death of both the upper brain and brain stem. A person who is brain dead has lost both the capacity to think and perceive, as well as the control of basic body functions. Court challenges to consider upper brain death alone have so far failed, but history suggests that our current definition of death is far from permanent. In the future it may be possible for individuals to define death for themselves by specifying under what circumstances they want to be considered dead.
Clinical definition: Brain death (irreversible cessation of all function of the brain) normally occurs after a stroke, or an impact that causes the brain to swell and push against the skull, preventing blood from flowing to the brain. In the absence of oxygenated blood, brain cells quickly die. The dead cells break down and liquefy. Brain death is quite different from reversible coma (unconsciousness) in which living brain cells remain.
A person can remain permanently unconscious with total or partial brain death. A person with death of only the upper brain (cerebral hemispheres) will not have consciousness, memory, knowledge or thought, but the living lower brain (brain stem) allows the heart to pump, the lungs to breathe and the body to function.
To be legally brain dead, all function of both the upper and lower brain must cease. Because the heart will fail on a brain-dead person, certification of death by brain-death criteria (instead of circulatory criteria) will only be needed when the dead person's body functions are being maintained by an artificial ventilator.
To establish that the brain is dead, certifying doctors must ascertain that: there is no evidence of brain function over a period of time the loss of function is not a result of drugs, hypothermia (low temperature), hypoglycaemia (low blood sugar) or hyponatraemia (low blood sodium) the person has sustained a brain injury sufficient to account for the irreversible loss of brain function.
Whole brain death is required for the legal determination of death in Australia. If the condition causing coma and loss of all brain-stem function has affected only the brain-stem and there is still blood flow to the supratentorial part of the brain (the cerebral cortex), this does not meet the legislative requirements in Australia. This contrasts with some other countries where brain-stem death (even in the presence of cerebral blood flow) is the accepted standard.
Example
In our example of the mother above who could be half brain dead, does not mean that she is legally dead. Hence, in many cases, next to kin has a choice to actually decide when the person should die. The purpose of this article is to make the advisors communicate to their clients in making that decision. In fact, if the next to kin wants, with advice can keep the ventilator going till all the re-contribution strategy is complete - namely 9 years in our example.
Extreme thought - but the point is that the beneficiaries should decide the time of death and consider the cost of the ventilator and a hospital bed against any tax bill, in our example $1.7M.
Research on "When do you die"
See below definition of "death in Australia" and my research on how you can help those who have nominated you as a death benefit beneficiary, not to die or time their death properly- at least till things are sorted in super. After you have read my research, some smart advisors may think about having an office in a hospital because many a times the ventilator is switched off - that is, death is pre-poned, before all estate planning issue are considered.
If you are still reading this article (I know you will thank me one day - to thank me now, you can simply click 'reply' on your screen) and if you educate your clients, you can save the dependants some tax dollars. Frankly, if you were not at the conference, to learn more on this topic you must at least attend our seminar. For Melbourne advisors, we have only last 7 seats left and to make it easier for you, I have made it half price - but without the free SMSF deed or 10 free audits on the online audit portal.
By Manoj Abichandani
SMSF Technical Director
Caution - the below is my research on death - please read with a light heart
Death - Legal Definition
For the purposes of the law of Victoria, a person has died when there has occurred-
(a) irreversible cessation of circulation of blood in the body of the person; or
(b) irreversible cessation of all function of the brain of the person. (Human Tissue Act 1982 (Vic) s 41).
It may also be clear when a person is not dead. A person with a pulse and a respiration rate 'of less than six breaths per minute' may be close to death, but they are not dead. Failure to determine that a patient with a pulse is in fact alive has nothing to do with the law, and everything to do with appropriate professional practice and competency.
In other cases death may not be obvious. This is why, where a person's circulation and respiration are being artificially maintained, two doctors are required to certify death before steps can be taken to harvest their organs for transplantation. Defining Death
Under Australian law there are two definitions for death: cardiac death and brain death.
Cardiac death occurs when a person is not breathing and their heart stops and cannot be restarted. As a consequence of this the brain will then stop functioning as it is being starved of oxygen.
Brain Death occurs as a result of the same things except they occur in a different order. The brain sustains a severe injury, is starved of oxygen and stops functioning. As the brain stops functioning vital centres become affected, the person stops breathing on their own and eventually the heart stops.
How does a person become brain dead?
Brain injuries from direct head trauma, bleeding in and around the brain from blood vessels, or acute lack of oxygen as a result of a cardiac or respiratory arrest may lead to an increase in the pressure inside the skull which causes a coma. When the brain is injured it swells just as any part of the body does.
The skull contains the brain, its blood supply and the cerebral spinal fluid. The pressure inside the skull is held in a delicate balance by the normal volumes of these three components. If there is an increase in the volume of one component that is not offset by a decrease in the other components the pressure inside the skull will rise. This increase in pressure could lead to a decrease to the oxygen supply and b rain cells begin to die after minutes when starved of oxygen, resulting in permanent brain damage.
If the brain swelling increases it can push the brain downwards onto the brain stem, which is where the spinal cord and brain join at the back of the neck. When this happens, vital brain stem functions, which are necessary for life, stop. The brain stem controls our breathing, our heart rate, and our blood pressure and body temperature. Brain cells cannot regrow or be replaced. Unlike coma, brain death is irreversible.
How is brain death diagnosed?
There is a checklist of things that must be covered before brain death tests can begin. The checklist rules out whether or not there are other causes of the coma. Two appropriately qualified senior doctors perform separate tests at the bedside to determine whether the brain is working or not.
These doctors check to see if the cranial nerves that pass through the brain stem and control all vital involuntary reflexes are working. They will be looking to see if the person has any: response to pain; response to light by the pupil of each eye; blinking response when each eye is touched; eye movement or response to ice cold water when it is put into the ear canal,; cough or gag (swallowing) reaction when the back of the throat is touched; breathing when the person is disconnected from the ventilator .
For a person to be declared brain dead they must not show any response to each and every one of these tests.
Why does the patient still appear alive?
During this time the patient will be warm and pink and their chest will be moving. After brain death has been confirmed the patient will remain connected to the ventilator until the decision is made when to stop the ventilation. The patient's heart will continue to beat as it has a natural pacemaker that works independently of the brain and will keep working at this time whilst it receives oxygen. If the ventilator is not stopped, because the brain has already died the patient will progress to kidney, liver and then cardiac failure over a period of hours to days.
What happens when brain death is diagnosed?
After brain death has been confirmed the Intensive Care doctor will meet with the immediate family to confirm the result of the brain death testing and discuss the implications of this outcome. Patient care will not change until after that meeting has taken place.
Options for a family at this time are to stop the ventilation and allow the heart to stop or if the patient wanted to be an organ donor - to keep the patient in Intensive Care connected to the ventilator receiving care for another 10 to 12 hours.
If the family opts to stop the ventilation and/or declines organ and tissue donation, the medical and nursing staff will discuss and plan this process with the family. Every attempt will be made to individualise this process to suit each family, keeping in mind that the patient is now legally dead and their heart may stop due to cardiac failure prior to the ventilation being ceased. Once the ventilator is switched off the heart will stop almost immediately.
What are living people reactions to Death?
Throughout the world, death and the rituals that surround it are steeped in taboos. Death is celebrated, embraced and feared. Around death and the dead, cultures put in place diverse restrictions and practices associated with clothing, food and ritual.
In Australia today, many people find being in the presence of death frightening and unwelcome. Death is often hidden, sanitised and orderly. The Australian Museum has developed a website to accompany an exhibition designed to help explore some of the taboos surrounding death and explain what happens to our bodies when we die. Death begins when the heart stops beating.
Meaning of death in various religions
For the Roman Catholic Church death is the 'complete and final separation of the soul from the body'. However the Vatican has conceded that diagnosing death is a subject for medicine, not the Church.
In 1957 Pope Pius XII raised the concerns over whether doctors might be 'continuing the resuscitation process, despite the fact that the soul may already have left the body.' He even asked one of the central questions confronting modern medicine, namely whether 'death had already occurred after grave trauma to the brain, which has provoked deep unconsciousness and central breathing paralysis, the fatal consequences of which have been retarded by artificial respiration.' The answer, he said, 'did not fall within the competence of the Church.'
It remains for the doctor and especially the anaesthesiologist, to give a clear and precise definition of 'death' and the 'moment of death' of a patient who passes away in a state of unconsciousness. Pope Pius XII Followers of religions like Zen Buddhism, and Shintoism believe that the mind and body are integrated and have trouble accepting the brain death criteria to determine death. Some Orthodox Jews, Native Americans, Muslims and fundamentalist Christians believe that as long as a heart is beating--even artificially, you are still alive.
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