With a growing trend towards individuals managing their own superannuation through Self-Managed Super Funds (SMSFs), the estate planning aspect of SMSFs is becoming an increasingly important issue. For example, what happens if the trustees or members of the fund are no longer able to fulfil their roles through mental incapacity or sickness?

If you are getting on in years, here are some options to consider for your SMSF:

1. Appoint a professional trustee. Giving up full responsibility for the operation can be a good idea but it will involve extra cost. Also, your lifestyle may be affected due to delays in accessing funds. A retiree running his or her own SMSF can access money immediately, while a professional trustee may take several days to release cash.

2. Draw up a power of attorney (POA). It is necessary to exercise care when appointing someone as your attorney as they will have full control of the SMSF and must act in the best interests of the trustees. This person should also have a sound understanding of business and financial management. The POA may also be the executor of your estate.

3. Rollover to a public offer or industry fund. This involves selling or redeeming the SMSF’s assets, so capital gains tax implications need to be considered. Loss of control over the fund’s investment decisions and the investment options available within the new fund also need to be taken into account.

4. Include your children. Once your children are sufficiently mature they may be added as members or trustees of your SMSF. They should then attend all relevant meetings and be involved in the decision-making. Families with more than two children may find this option tricky as SMSFs are currently allowed only four members.

Talk to your licensed financial adviser about the most appropriate option for you to ensure the smooth operation of your SMSF should something happen to you.

Sources:
Murden, M and Gandolfo, P ‘The trouble with ageing trustees’ National Accountant, February/March 2010
www.ato.gov.au   Self managed super funds – key messages for trustees

We are here to help with your SMSF 
Call (02) 4926 2300 or email us. 

To discuss your super through SMSFs or your super in general call the team at Leenane Templeton. 

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Following changes to the SMSF sector as part of the government’s Stronger Super review measures, SMSF trustees are now required by law to consider the need for insurance cover for members, such as life or disability insurance.
 

Considering insurance for one or more of its members will come under the SMSFs broader investment strategy, which trustees will need to ‘regularly review’, taking into account the changes in circumstances of the fund and its members. The new legislation does not require an SMSF to obtain an insurance policy on the behalf of its members, but rather demonstrate that the fund has considered insurance as part of its investment strategy.
 

It is critically important that trustees review their fund’s investment strategy and that all appropriate documentation is maintained to prove that regulations have been complied with. Compliance may be shown either through decisions taken in regards to the fund’s investment strategy, or if there has been no change, then the trustee minutes will show that the required actions have been taken.

Contact Leenane Templeton today for further information.

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