The role of estate planning in super

If you are thinking that a so called ‘Self-Managed’ superannuation fund (SMSF) might be suitable for you, one of the critical areas to address in the set-up phase is how your super account balance will be handled when you’re no longer here. We have outlined below some points that must be part of your estate planning and managing your SMSF.

1. Binding Death Nomination

This is a written direction to the trustee of your fund instructing the trustee to pay your benefits to your nominated beneficiaries. These directions are binding on the trustee and override their discretionary power to distribute the assets normally contained within the superannuation trust deed. It is important to remember that Binding Death Nominations may be challenged especially if poorly drafter, and also rely on the trustworthiness of the person acting on the nomination. The most appropriate beneficiary will depend on your personal circumstances. As there may be tax implications, it is advisable to seek professional advice.

2. Appointor share

If you are the only member of your SMSF with a corporate trustee, you may also consider issuing an appointor share in the company. This share becomes active when you die and gives the holder the right to appoint another director, who can then act to wind up the fund and pay the death benefits as required.

3. Wills

You should be aware that super benefits are not automatically paid to your estate but you can arrange for this to happen. This must be clearly set out in the trust deed. Upon your death, the Executor of your Will becomes your Legal Personal Representative (LPR) and manages the handling of your estate. Depending upon the trust deed rules and the specific circumstances of the trustees, upon your death, your LPR may become a trustee of your SMSF, especially if there are no other surviving trustees until the death benefits are paid. It is important to choose an Executor who is capable of fulfilling this role.

4. Super pensions

If your super fund is paying you a pension which you would to continue being paid to your dependant/s upon your death, you should consider setting it up as a Reversionary Pension. This means that when you die, the pension reverts automatically to the nominated dependant (who must meet the SIS definition of a dependant, and must also be a member of the fund), without the need to go through the process of the fund selling assets to pay a death benefit. Regulations ensure that pension funds continue to be exempt from tax until the death benefit is paid in full.

Establishing a Self-Managed Super Fund requires a lot of attention to make sure you meet the stringent regulations governing them and, just as importantly, it is congruent with your estate planning instructions. Always consult with an experienced professional in this area to get it right the first time.

General Advice Disclaimer

This article contains general advice only, which has been prepared without taking into account the objectives, financial situation or needs of any person. You should, therefore, consider the appropriateness of the information in light of your own objectives, financial situation or needs and read all relevant Product Disclosure Statements before acting on the information. Whilst every care has been taken to ensure the accuracy of the material, Paradigm Strategic Planning or Sentry Advice Pty Ltd will not bear responsibility or liability for any action taken by any person, persons or organisation on the purported basis of information contained herein. Without limiting the generality of the foregoing, no person, persons or organisation should invest monies or take action on reliance of the material contained herein but instead should satisfy themselves independently of the appropriateness of such action.

Paradigm Strategic Planning Pty Ltd is an Authorised Representative of Sentry Advice Pty Ltd AFSL 227748

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