Q&A: What should we have in place for when an individual trustee of an SMSF passes away?

Q: What should we have in place to cover the situation when one of the two individual trustees passes away (in an SMSF)?

A: What I need to highlight here, is we’re looking at individual trustees and not a company acting as trustee. We’ve got two individual trustees. Now, if I go back 10 or 15 years, this is a very common way of doing it. Over time, we’ve seen most people move to what is a corporate trustee. But there’s still a whole heap of funds out there that have got individuals as the trustee. And each of those funds is going to have its own unique set of circumstances which do need to be looked at. Generally, if we looked at this for what are the issues that most funds with individual trustees would need to keep in mind is identifying who is going to come in and take over as the second individual trustee. You can’t have a one member SMSF with one individual trustee. That’s not how trust law works. You can’t essentially act as trustee by yourself, for yourself. You need to have at least two.