Ensure Proper SMSF Succession Planning
Are you worried about what happens to your self-managed super fund (SMSF) assets after you die? Although it is hard to navigate through this sensitive, complex and highly personal area in your life, SMSF succession planning is vital in shaping the future of your super in your later years. It ensures that the fund control and your death benefit will be given to your dependent or other authorised beneficiary at the right time. Proper succession planning avoids sibling rivalries and family acrimony, which can potentially threaten your best-laid plans.
How Does Succession Planning Differ from Estate Planning?
While both succession and estate plans play a crucial part in deciding what happens to your assets after death, these are entirely different activities.
Succession planning is about who will control your SMSF after you die or you’re incapacitated. Good succession planning ensures a smooth transition of SMSF control over investment strategies, safeguards your instructions regarding death benefits distribution and provides benefit payment certainty. In addition, it avoids compliance and administrative problems with the SMSF after your death.
Estate planning is a subset of the broader succession planning process that determines who gets your assets and how they get them when you die. Considering your super death benefits, these could be in the form of reversionary pension, lump sum or combined.
The Importance of Succession Planning
Succession planning may be the least you consider when managing your SMSF, but it is a necessary process that ensures the funds’ stability for remaining family members. More so, it provides peace of mind and certainty for a deceased trustee’s family.
It is not enough to have a binding death benefit nomination or detailed Will alone to ensure that the distribution of your super assets is according to your plan. Remember, your SMSF’s trust deeds supersede your Will since super funds follow trust law. Thus, your newly appointed or remaining SMSF trustees have control over what happens to your benefits than the instructions in your Will.
n Katz v Grossman  NSWSC 934, it is highlighted how succession planning is vital in determining the subsequent distribution of super benefits after a member dies. The deceased’s Will states that there will be equal distribution of his assets and more than $1 million in his SMSF to his son and daughter. However, his daughter was admitted as a co-trustee, and she used it as leverage to pay herself the entire super death benefit. She even appointed her husband as a co-trustee and declined to follow her late father’s non-binding nomination. Although her brother contested, the Court ruled she’s within her legal rights.
5 Things to Consider for a Successful SMSF Succession Planning
1. Appoint your successor who has knowledge of running an SMSF with a complete document that states their responsibilities.
2. Make sure your enduring power of attorney (EPOA) and Will nominate the person you want to take in charge. This should cover your SMSF and super benefits.
3. Keep your binding death benefit nomination (BDBN) updated to ensure that the fund trustee gives your nominated beneficiary the death benefit.
4. Avoid control issues within your family members by moving your SMSF to a corporate trustee structure and making sure the remaining members will not have the power to remove it after your death.
5. Seek professional aid from lawyers, accountants, investment professionals and financial advisors to support you in a successful succession strategy.
Take advantage of the added benefits of an SMSF Insurance structure at a low-fee, flat-rate SMSF setup service.
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