We have outlined below some points that must be part of estate planning and managing SMSF’s.
1. Enduring Powers of Attorney
An Enduring Power of Attorney appoints another person to act on your behalf when you die. Every member of your SMSF should have one and copies provided to each member and the fund auditor and also held with the fund documents.
2. Binding Death Nomination
This is a written direction to the trustee of your fund instructing the trustee to pay your benefits to your nominated beneficiaries. These directions are binding on the trustee and override their discretionary power to distribute the assets normally contained within the superannuation trust deed. The most appropriate beneficiary will depend on your personal circumstances. As there may be tax implications, it is advisable to seek professional advice.
3. Appointor share
If you are the only member of your SMSF with a corporate trustee, you may also consider issuing an appointor share in the company. This share becomes active when you die and gives the holder the right to appoint another director, who can then act to wind up the fund and pay the death benefits as required.
You should be aware that super benefits are not automatically paid to your estate but you can arrange for this to happen. This must be clearly set out in the trust deed. Upon your death the Executor of your will becomes your Legal Personal Representative (LPR) and manages the handling of your estate. Your LPR usually becomes a trustee of your SMSF until the death benefits are paid. It is important to choose an Executor who is capable of fulfilling this role.
5. Super pensions
If your super fund is paying you a pension which will continue being paid to your dependant/s, you should consider setting it up as a Reversionary Pension. This means that when you die, the pension reverts automatically to the nominated dependant (who must also be a member of the fund), without the need to go through the process of the fund selling assets to pay a death benefit. Regulations ensure that pension funds continue to be exempt from tax until the death benefit is paid in full.
Establishing a Self-Managed Super Fund requires a lot of attention to make sure you meet the stringent regulations governing them and, just as importantly, it is congruent with your estate planning instructions. Please call us to discuss.
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Disclaimer and Warning
The information above is of a general nature only. It should not be used as a source to make financial decisions. It’s also important to note that the legislation and figures related to this topic tend to change regularly and therefore the information above may not reflect the current status. We recommend that if you are looking for advice on this matter, you should contact us.