Your SMSF is a long-term plan. Much can happen during this time including illness, incapacity or death of a member.
It is best practice to have contingency plans in place to deal with unexpected events. For example, if a fund member dies, leaving you as the sole member are you happy to continue with the SMSF?
Outlined are some issues to consider planning for as trustees. Leaving the planning to when, and if an event happens may be too late.
Death – Think about where you want your superannuation to go on your death. Given the introduction of the $1.6 million transfer balance cap which means larger sums of money may need to leave the superannuation system sooner, planning has never been more important. You may need to think carefully about who receives your superannuation on death to maximise its benefit for your beneficiaries.
The rules of your SMSF, as set out in your trust deed and related documents, determine how the trustee structure is to be reconstructed on the death of a member as well as how death benefits are to be handled by you and your fund.
A lot of careful consideration needs to be given to understanding the member’s wishes to ensure that your fund’s trust deed and broader governing rules are drafted appropriately to achieve these requirements.
Legal tools to help direct your superannuation can include making a binding death benefit nomination to nominate who will receive your superannuation on your death or providing for your pension to continue (or revert) to a permitted beneficiary (such as your spouse) following your death.
You may also consider appointing a corporate trustee. If the membership of an SMSF with individual trustee’s changes, the names on the funds’ ownership documents must also change. This can be costly and time-consuming.
How can we help?
If you need assistance with planning for an unexpected event or reviewing your current strategies, please feel free to give us a call to arrange a time to meet so that we can discuss your particular circumstances in more detail or refer to the SMSF Association Trustee Knowledge Centre.