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Estate Planning And SMSF: Important Things You Need To Know

Estate Planning And SMSF: Important Things You Need To Know 

After your death, your wealth can fall into the wrong hands, or even the government may take its requisition. So, you must make all the plans so that it gets appropriately distributed among the right persons. If you have your superannuation fund, proper planning will result in adequate running even after the death of a critical fund member. Self-managed superannuation funds can be beneficial if you want to achieve planning objectives. There is immense flexibility compared to the public offer funds.

What Is Estate Planning?

Estate planning is the process by which you can organize your financial affairs. So that your wealth can be evenly distributed to all of your chosen beneficiaries after you die. An effective estate plan can benefit you by reducing the tax to be paid by your family members and other fund beneficiaries while receiving the assets. It also helps in fulfilling all your wishes. It can help the fund to get a maximized deceased estate tax return.

Whenever you draft an estate plan, you should maintain regular reviews as your personal or family circumstances can change frequently. You should also check whether your beneficiaries remain eligible to get the super death benefits.

The first step of estate planning is writing a will. However, in the case of superannuation, a will cannot be reliable to assure you of all the intentions getting fulfilled.

What Are The Issues You Should Consider For The SMSF Estate Planning?

When you hold super benefit within an SMSF, you must do estate planning regularly and here. You have to consider several factors.

Relation Between Your Will And Super Benefit

Do not assume that having a properly designed will shall assure an even distribution of your super death benefits. You should never forget that super does not become an automatic part of the personal estate. Even if you have your self-managed fund. It is because you can only hold the super in trust on your behalf and cannot directly own it in your name. The trustee will decide who will get the death benefits after your demise. Through your will, you cannot tell the trustee to pay a particular person of your choice.

One thing you should know here. The SMSF trust deed provisions can get the preference over any instructions you have written in your will about what you wish to happen to your super account unless the benefit has to be paid to your will’s executors, who are here the Legal Personal Representative. You can ask experts from Palladium Financial Group to get you an SMSF accountant in Perth who can help you understand all these rules.

Tax And Your Death Benefits

According to super law, there are certain restrictions on the beneficiaries who can get your death benefit and get it as a different amount or income stream. Although both dependants and non-dependants can get the super death benefit from your SMSF, tax implications depend on the beneficiary status. 

SMSF Control

The trustees who have control over your SMSF will significantly impact two aspects of your after you have died. They can control your super benefit and the assets of the fund. Super is not a part of your estate. The trustees have full rights to make any decision they believe can serve the best interests of the fund. For example, the trustees may decide to sell family business or property as assets, which you might have wished to keep within your SMSF.

In the past, cases happened where SMSF trustees ignored the wishes of a dead member and re-drafted the payment from the super death benefits. That led to chosen beneficiaries like children or spouses missing out on considerable amounts. So, you must select your SMSF’s trustees very carefully as having an inappropriate person in charge may lead to waste in the most carefully planned distribution of the estate. So, it is better to consult a professional who has substantial experience in estate planning. You may take a strategy to consider posting a favoured beneficiary in charge. So that he can distribute the super death benefits following your wishes.

SMSF Trust Deed

For a successful estate plan, an updated trust deed is vital. You should make sure that the trust deed gets a regular revision to adjust to all the current and upcoming changes in legislation. A good SMSF trust deed will give the trustees the ability to achieve the goals related to your estate planning. Making a well-demonstrated trust deed can help you to include clauses restricting death benefit distributions, beneficiaries and control.

Regular review of the trust deed is specifically essential for avoiding disputes that arise from separation or the sudden demise of a fund trustee. It can also help a new trustee to avoid challenges from the current trustees.

Death Benefits And SMSF

You should have a BDBN or binding death benefit nomination and a will to ensure that your estate plans are entirely carried out. Without the BDBN, the trustee can pay your death benefits to the estate or your chosen beneficiaries like a spouse or dependent like a child or any other person.

Here, clear and regularly updated documentation is vital to ensure that your estate plans are entirely executed as per your wish. So, you should check that all of your SMSF members have completed a BDBN, they have signed their nominations, and those documents are witnesses and kept safely with other significant fund documents.

Other Factors

In addition to all the factors discussed above, there are some other factors too that you need to consider. One of those important factors is reversionary pension. With the help of it, your beneficiary can automatically become eligible to receive the super benefits. Moreover, you should always consider EPOA or enduring power of attorney. 

In The End

Death is inevitable regardless of how much care we do about our health. So, whenever a severe illness gets in, you must make all the necessary plans. With this, your family can get their receivable money after your death.

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