Succession planning for your SMSF
Managing a self-managed super fund (SMSF) in the event a trustee passes can be a difficult and complicated process.
While succession planning may not be one of the first responsibilities which comes to mind when managing a SMSF, it can ensure the funds stability for remaining members as well as providing certainty and peace of mind for a deceased trustee’s family. There are a few avenues for trustees to take when future-proofing their SMSF.
Appoint a new trustee:
In the event of a trustees death, sole member funds can nominate another trustee. Note that the non-member trustee cannot be the employer of the member unless they are related. This would not be an option for a fund with two members as the available exemptions only apply to single member funds. Those who appoint a family member or close friend must consider first whether they are suitable for a role; running a SMSF requires expertise and knowledge, and appointing someone with limited experience may not be in the best interest of the fund’s future. That's where a specialist SMSF team can help.
Enduring power of attorney:
SMSF trustees may choose to appoint an enduring power of attorney as a replacement trustee. An enduring power of attorney is someone who makes decisions on the trustee’s behalf if they become incapacitated or pass away. Common power of attorneys include accountants, financial advisors and lawyers; people who understand SMSF management and the associated challenges. For an enduring power of attorney nominee to be appointed, legal documents, i.e. the succession documents appointing the replacement director, must be in place before the member loses their capacity to be a member.
Binding death benefit nomination:
By using a binding death benefit nomination (BDBN), trustees can dictate where their super goes if they pass away. Since a person’s superannuation does not make up part of their estate and is therefore not automatically covered by their Will, a BDBN is often a good solution to help with the distribution of super member benefits.
There are alternative strategies that may be more appropriate than a SMSF, depending on your individual financial situation. Investment decisions are best made with the input of an appropriate financial adviser. Contact us and our specialist SMSF team for any further advice.
Five step super check
27th September 2019
Superannuation does not have to be time consuming or difficult.
Do the five-step super check to help sort out and grow your super.more
Superannuation strategies for end of the financial year
24th June 2019
As the end of the financial year is fast approaching, it is an ideal time to think about ways that you could grow your superannuation.
Here are some strategies you can consider that will... more
High-risk SMSF areas being monitored by the ATO
29th April 2019
Self-managed super funds are closely monitored by the ATO to ensure regulations are being met across all areas.