SMSFs and estate planning: An introduction

In this newsletter we include the first article in a four-part SMSF and Estate Planning series, designed to highlight and explain the key issues relevant to estate planning within a self-managed super fund (SMSF).

We will cover each of these issues from three perspectives: issues specific to SMSF members, trustees and the fund itself.

This first article will provide you with an introduction and overview of the key SMSF estate planning issues and opportunities, which we will then look at in more detail over the coming months.

Introduction

A key feature of an SMSF is the ability for members to have a greater level of control over the payments made from their super fund after their death.

Carried out correctly, the outcomes for your loved ones can be extremely beneficial. Not only from a tax perspective, but also for asset protection and for an effective transfer of wealth.

You are probably aware of the importance of having a valid and current Will that sets out your wishes for the distribution of your non-superannuation assets on your death. Less well understood is that your retirement savings held in super, which can be substantial, are not automatically dealt with through your Will.

So it is extremely important that you put in place the required documentation and fund specific paperwork to achieve the desired outcome for your super balance.

As we don’t know how long we’ll live, this task should be seen to when you establish your SMSF and reviewed whenever your financial or family circumstances change.

Another important issue relating to estate planning for SMSF trustees is the need to consider your mental capacity and the outcomes that may result when that capacity diminishes as you age. There are a number of important steps that may need to be followed should this occur.

The three key areas of estate planning for SMSFs

How death benefits are paid and to whom would usually be considered a “member level” issue or decision and is probably the thing most often spoken about when discussing estate planning in an SMSF.