The Pros and Cons of choosing a Self-Managed Super Fund

The Pros and Cons of choosing a Self-Managed Super Fund

Superannuation is a large component of building long-term wealth and retirement planning. Self-managed super funds are becoming increasingly popular as the investment structure for those who prefer greater autonomy and control over how their funds are being invested and accumulated. However, whilst self-managed super funds can be effective for building wealth and minimising tax burdens, they must be properly executed and managed in order to protect you and your family’s interests. Etheringtons Solicitors have a team of experienced solicitors who can assist you in a range of wealth management matters in a strategic and compassionate manner.

What is a self-managed super fund?

self-managed super fund (“SMSF”) is a private superannuation fund where the members are usually the trustees. Members of the SMSF run it for their benefit and are responsible for complying with the relevant laws. A SMSF can have up to four members, but it is quite common for there to be just one member.

A SMSF trustee is the person responsible for ensuring the SMSF is maintained for the purpose of providing retirement benefits. The trustee can be a company or an individual. For a single member SMSF, there must be two individual trustees, the other trustee must either be related to the member or be another person who is not an employer of the member.

Benefits in establishing a self-managed super fund?

1. Control and Choice of Investment

The primary benefit of a SMSF is the control and choice you have over how the funds are invested. For example, SMSF’s can invest in commercial properties, term deposits, shares and derivatives. SMSF’s are recommended for small business owners as the fund can receive steady income from the SMSF when the business property owned by the SMSF is leased back to the business.

2. Tax Minimisation

SMSFs grant greater flexibility than other superannuation structures to minimise overall tax payments. If you are a SMSF trustee, you are entitled to the reduced superannuation tax rate. Provided the SMSF complies with legislation, your investment return would therefore be taxed at a maximum of 15% in Australia.

The tax-free benefits are highly attractive. Benefits received after the age of 60 and pension payments received from the fund are tax-free. A SMSF with multiple members can also allocate earnings from members who are not retired to any retired members to realise additional tax advantages.

We highly recommend that you seek advice in relation to SMSFs as they may also be utilised for tax strategies around capital gains and franking credits.

3. Life Insurance

The following forms of personal insurance can be paid through a SMSF:

  • Life Insurance;
  • Total and Permanent Disability Insurance; and
  • Income Protection Insurance.

Life policies are often held in SMSFs because the funding of premiums can become tax deductible if certain contributions are allocated to fund the premiums. The level of cover and insurance needs are unique to each individual. Professional advice must be sought prior to taking out a life insurance policy through a SMSF.

Whilst there are clear benefits to having a SMSF, there are important factors to consider when deciding if it is the appropriate wealth building strategy for you.

Important Considerations

1. Time and effort of managing a SMSF

SMSFs require the trustee to take responsibility for all investment decisions, unlike an industry or retail fund. A sound understanding of investment options and markets is required to be a trustee of an SMSF. Poor decisions will impact the assets of the fund and the retirement savings of its members.

Furthermore, trustees are responsible for ensuring that their fund complies with legislation. If the ATO rules that there has been a breach of these obligations, it may impose high penalties on trustees who will be personally liable.

2. Cost of running a SMSF

The costs of running a SMSF are fixed and therefore can be disadvantageous when the assets held within the SMSF are low in value. The costs reduce in proportion to the value of the fund, and it is advised that the fund should contain at least $250,000 worth of assets to ensure the costs of running the SMSF are worthwhile.

3. Estate Planning

The superannuation benefits of a SMSF are not assets that automatically fall within the ownership of a person’s estate upon their passing. Allocation of benefits is decided by the trustee unless written direction is provided. Without careful consideration and planning, your superannuation funds may not end up where you want them to after your death.

You may properly document where superannuation benefits are to be directed upon the death of a beneficiary through a binding death nomination. A binding death nomination must be renewed every 3 years while a death benefit agreement is permanent until revoked, unless it is a non-lapsing nomination.

Contact Etheringtons Solicitors

Wealth management and estate planning takes careful contemplation. If you or someone you know requires more information or needs advice in relation to self-managed super funds, please contact us on (02) 9963 9800 or via our contact form.

Estate Planning: What is an Estate Plan?

Estate Planning: What is an Estate Plan?

An estate plan involves more than just preparing and signing a Will. Estate planning requires a holistic approach in considering a person’s present circumstances and foreseeable future. A plan needs to consider who matters, what you have now, what you may have in years to come, and what your final wishes will be. Your lawyer’s role is to document these wishes to ensure they are legally enforceable and can be carried out when you pass. This article considers what an effective estate plan involves and explores some key considerations you should contemplate when preparing an estate plan.

What is effective estate planning?

An ideal estate plan will:

  • Appoint a trusted person or persons (attorney / guardian) to manage your affairs both financially and personally if you are incapacitated; and a legal personal representative (executor / trustee) to administer your estate (and associated trusts) after you pass.
  • Nominate your intended beneficiaries with certainty or provide for a class of beneficiaries to ensure that your assets pass only to those you intend to benefit.
  • Prevent uncertainty, undue stress and expense by reducing the likelihood of a family provision claim, which can undermine your wishes.
  • Safeguard your assets from unintentional distribution to estranged partners or creditors of insolvent / bankrupt beneficiaries and protect vulnerable beneficiaries such as those with a disability, drug, alcohol or gambling problem.
  • Provide flexibility in distributing assets in anticipation of the present and future needs of beneficiaries.
  • Maximise the value of your estate through effective tax planning to minimise capital gains, and income tax payable by beneficiaries on their inheritance.
  • If relevant, provide for effective business succession or the winding up of a business.

What are some considerations in estate planning?

Family structure

Every family is different and there is no one-fit solution for all. You should start with an overview of your family circumstances and a list of all family members whether or not you would like them to benefit from your estate.

Acknowledging where there is conflict between family members and identifying any eligible persons who might claim on your estate will assist in devising strategies to reduce the potential for future claims. Blended families are common and require special attention as there may be competing interests between past and present partners, and biological children and step-children.

Choosing your executor and trustee

The executor and trustee will be your personal legal representative who will administer your wishes when you have passed on so the person filling this role should be chosen with care. For simple estates, a spouse or child / children (or combination) are usually appropriate choices to oversee the administration and finalisation of the estate.

For more complex estates, with business interests or which will have ongoing trusts, it may be preferable to appoint a professional with expertise in this area.

Similarly, if there is conflict within the family a neutral executor may be more appropriate to ensure that the role is carried out with impartiality.

Powers of attorney, guardianship and advance care directives

New South Wales allows for the appointment of an attorney, guardian or decision-maker to manage your financial, legal and / or personal affairs for a defined or ongoing period and to make health-related decisions if you are incapacitated. A power of attorney relates to financial decisions and a guardianship relates to health and lifestyle decisions.

These documents provide for flexibility in choosing the type of functions to be carried out, and the duration for which the authority is given. Powers of attorney can be made enduring so that a person can manage your affairs indefinitely if you lack decision-making capacity.

These documents form an important part of your overall estate plan by ensuring the ongoing management of your affairs by a trusted person if you are incapable.

Your assets

A detailed list of assets and liabilities will assist in determining the overall value of the estate, how and when assets should be distributed, the appropriate structure of the Will and whether a testamentary trust would be beneficial (see below).

You will need a precise description of the assets, their location, whether they are held individually or jointly and their value. Whether certain assets are encumbered will also be a relevant consideration.

If you are including specific gifts, such as items of sentimental value, antiques or artworks, these should be clearly identifiable and described in the Will.

Remember, your assets are likely to change over time and this needs to be factored into your estate plan. A gift of a specific asset of considerable value which is later disposed of will fail and may cause an unintentionally unequal distribution amongst beneficiaries.

Using a testamentary trust

In many cases, it will be advantageous for a Will to establish a testamentary discretionary trust. This is a trust that comes into effect after the Will-maker passes. Administration of the trust is carried on by a trustee pre-appointed by the Will-maker. The trustee determines how and when estate assets are managed and distributed.

If properly managed, the flexibility of a discretionary trust allows beneficiaries to access favourable taxation treatment with respect to their inheritance and provides protection for at-risk or vulnerable beneficiaries from claims by creditors or ex-partners. With careful planning, the timing of transferring estate assets can postpone or minimise capital gains tax liabilities.

Even modest estates may benefit from having a testamentary trust, particularly where the Will-maker is part of a blended family. The trust can allow the Will-maker to provide immediate benefits for a current partner (such as a right of residence and income), whilst preserving assets for residual beneficiaries, such as the children.

Trusts can also include separate suites of provisions to apply depending on whether the current partner survives or pre-deceases the Will-maker.

Your superannuation

Superannuation does not automatically form part of your estate assets. Death benefits, comprising the superannuation account balance and any life insurance payments, are paid to a ‘dependant’ determined by the fund trustee, or in accordance with a Binding Death Benefit Nomination (BDBN).

Most funds allow members to nominate their intended beneficiaries through a BDBN. This process forms an important part of estate planning – without a valid BDBN, the beneficiaries are decided by the trustee in accordance with the terms of the trust deed and the relevant legislation. This decision may not reflect what the Will-maker intended. A BDBN does not last and needs to be updated every few years to remain valid.

Consideration of the way death benefits are taxed in the hands of the recipients is also an important issue. Essentially, a spouse or partner will be considered a tax-dependant under taxation law and accordingly will receive death benefits tax free. Alternatively, whilst adult children are considered dependants under superannuation legislation, they are not ‘tax-dependants’ and will need to pay tax on any death benefits.

Business succession

If you are carrying on a business, whether as a sole trader, partnership or through a company, you will need to think about how you would like these interests dealt with after you pass. If you are a sole trader, you may include terms in the Will for the continuation of the business by your partner, children, friend or trustee. If you conduct the business as a sole director through a corporate entity, you will need to consider who will take your place as shareholder and managing director. Alternatively, you may wish for the business to be wound up.

Some partnerships will have buy-sell insurance in place. This is a policy allowing a surviving partner to acquire the deceased partner’s share so the business can continue. Generally, the surviving partner or partners receive lump sum funding to purchase the deceased partner’s share from the estate. Business succession planning requires consideration of the intended beneficiaries and whether they have the desire, skill and competence to continue managing the business.

Get legal advice

Effective estate planning takes time and careful contemplation. Your estate plan will usually comprise various documents to ensure the effective management and finalisation of your affairs so that your life’s efforts reward those you intend to benefit.

If you or someone you know wants more information or needs help or advice, please contact us on (02) 9963 9800 or via our contact form.


Making Your Will Count – Healthy Will Checklist

Making Your Will Count – Healthy Will Checklist

Making a Will is important for everyone over the age of 18, to make ensure their wishes are followed and their assets are distributed as they would want after they die.

If you don’t have a Will your assets will be divided according to how the law dictates in the rules of intestacy, that is, when you have not made a Will.  If you die intestate it is very likely that your estate will not be distributed as you would have desired.

A Will is also the place where you can indicate to your family and friends your wishes on other important matters, such as who you want to be the guardians of your children.

Making a Will shows a level of care in not wanting to give loved ones any more stress to deal with than they will already face when you pass away.  In many ways it is one of the most selfless and considerate things you can do.

Regularly review your Will

Preparing a Will is not a once-off event. It is sensible to review your Will regularly, and we suggest that this be done a minimum of every three to five years.

Changes in your life may create problems for others in interpreting your wishes in any Will you have already made and may undo all the good work you have done to protect those close to you by making one. It can make your Will ineffective or even invalid.

It could be that a Will made many years ago is still appropriate, just as it may be that a recently made Will is now out of date.

Ideally you should review your Will every five years or more frequently if necessary. It is likely that your needs and circumstances will change many times in the course of your life and with those changes it is prudent to consider your Will.

Healthy Will checklist

There are a number of life events that can impact on your Will and which mean you need to revisit and update it.

Here is a checklist of life changes which can impact on the validity of your Will and which you need to consider in examining the legal health of your existing Will.

  • Have you married? Or separated from your partner?
  • Have you had any children?
  • Is the person you named as executor, to carry out the wishes in your Will, still alive and well enough to do the job?
  • Have the circumstances of any beneficiaries changed to make you reconsider your wishes, or have any of them died?
  • Have you nominated any specific gifts that are no longer valid or don’t exist, for example, have you sold a property that you had left to someone in the Will?
  • Have you acquired any new assets that you would want to make specific plans for in your Will?


At the same time as you check the health of your Will, you need to check your super and life insurance, which is often now a part of your super policy.

Many people assume their superannuation will be divided up in accordance with the wishes in their Will, but that is not necessarily the case. You need to look at your super policy to check how you have nominated that your super should be allocated, and that it is still allocated in the way you want. Sometimes, a nominated beneficiary direction will lapse after three years.

At the same time, check the division of any life insurance you have in your policy, and update it if necessary.


The important thing is to consider your circumstances at every major personal milestone in your life.

Any Will you have made is likely to become out of date and no longer accurately represent your wishes in some way following changes in your life, possibly within a few years of drawing it up. It will depend on circumstances that are unique to you.

If you would like to discuss a new Will or changes in your circumstances and a review of your current Will please call us on (02) 9963 9800 or via our contact form.

Have You Been Left Out of a Will?

Have You Been Left Out of a Will?

The loss of a family member is always a difficult time, but it can become even more distressing to learn that you have not been included in the family member’s Will. Generally, a person may leave their assets to whomever they wish. However, the law recognises that there are those who relied on the deceased for support who can sometimes be unfairly left out of the deceased’s Will. Such people are able to make a claim so that their needs are adequately provided for.

How do I challenge the deceased’s Will?

There are two main grounds for challenging the deceased’s Will or contest the Estate. These are:

  1. Challenging the validity of the Will – this may be on the basis that the Will maker did not have the legal capacity to make the Will, or didn’t understand what they were signing; or
  2. A claim can be made under the Succession Act 2006 (NSW) on the basis that the Will maker failed to provide for a family member where they had a moral obligation to do so.

Can anyone challenge a Will?

Under the Succession Act, only persons who qualify as eligible persons under the Act may apply to the Court. There are seven categories of eligible persons, namely:

  1. The wife or husband of the deceased when they died;
  2. A person in a de facto relationship with the deceased when they died (including same sex partners);
  3. A child of the deceased;
  4. Former wives and husbands of the deceased or former de facto partners of the deceased, who were receiving or entitled to receive maintenance from the deceased when they died;
  5. A grandchild of the deceased, in certain circumstances;
  6. A step-child of the deceased in certain circumstances; and
  7. A parent of the deceased.

To show that you are entitled to receive some benefit from the estate you must show that the deceased had an obligation to provide for you and that you have been left without adequate provision for your proper maintenance, education or advancement in life. It is important to note that inheritance claims are subject to a strict time limit, which is 12 months after the date of death.

You may not need to go to court as most parties are encouraged to resolve their claims by mediation to avoid legal costs or any lengthy delays.

Get legal advice

If you are concerned, please be sure to contact us as soon as possible or you may be prevented from making a claim. It is usually a good idea to try and get a copy of the last Will of the deceased so that you can discuss the details with us more accurately. If you or someone you know wants more information or needs help or advice, please contact us on (02) 9963 9800 or contact us via our form, here. If you would like to prepare your Will with us, please fill out the Will Instruction Form and we will contact you.

Accessing Digital Assets – Estate Planning Essentials

Accessing Digital Assets – Estate Planning Essentials

The recent death of Gerald Cotten, former Chief Executive Officer of Canadian cryptocurrency exchange company, Quadriga CX, emphasises the importance of planning your electronic after-life.

Mr Cotton’s death in India at the age of 30, has not only raised suspicion as to its authenticity (and allegations of an exit scam), but reiterated the chaos that can be created if digital assets have not been considered in an Estate plan.

Mr Cotton was the sole custodian of encrypted passwords protecting over $200 million (USD?) worth of cryptocurrency (virtual currency created and stored electronically such as Bitcoin, Litecoin and Ethereum). His untimely death has left numerous Quadriga customers unable to access their assets. Mr Cotton’s widow states that she played no role in the running of Quadriga and, despite her efforts, has been unable to unlock the laptop used by Mr Cotton nor access any of his accounts.

Regardless of how the Quadriga saga unfolds, it is a timely reminder of how important it is to consider what should happen to our digital assets when we die.

What are digital assets?

A person’s digital affairs may encompass a range of online transactions, activities and accounts such as:

  • cryptocurrency;
  • financial assets including online bank accounts and shares;
  • intellectual property attached to domain names or online literary works;
  • online sporting and gaming accounts;
  • loyalty programs such as Flybuys Rewards and Frequent Flyers;
  • online shopping accounts such as eBay and Amazon;
  • Personal/business social media accounts such as email, Facebook, Linked-In.

All should be considered, and included, in an effective estate plan.

Issues unique to certain digital assets

Traditional cash-based assets such as money deposited in a bank, shares or other paper-based investments are held by title to the owner and can be transferred to the beneficiary with the relevant documentation. Ownership of digital assets like Bitcoin, however, is anonymous with owners accessing their cryptocurrency with private keys which are used to unlock and deal with the assets. This information may be held on a computer device (via a digital wallet), on a USB, or printed separately. These assets can easily be overlooked or ‘keys’ misplaced, representing unique challenges when it comes to administering an estate.

Many digital assets are also held globally and may therefore raise jurisdictional issues from an Estate planning perspective. In most instances, there is no uniform legislation governing access to a deceased person’s online accounts, so it is imperative that these matters are dealt with specifically in an Estate plan.

There are some simple steps you can take to ensure your online life is appropriately dealt with when you are gone.

1. Identify your digital assets

You should start by making a list of your digital assets (including online accounts) and determining what you would like to happen to them when you die.

Keep records of your online accounts and subscriptions including user names and passwords and store this information in a secure place.

Remember your online accounts and login details are likely to change frequently and your list should be maintained accordingly.

2. Understand your online accounts

Understanding how various accounts are dealt with by service providers will help to determine the type of action you would like taken when you die.

For example, Facebook account holders can advise in advance whether their account is to be deleted or memorialised. A memorialised account can provide a place for family and friends to share memories after a person dies on the deceased’s profile, and any content shared by the deceased person remains visible to those with whom it was shared. Nobody can log into a memorialised account.

Some loyalty programs such as Frequent Flyers may not be transferrable or redeemable after a person dies, so it may be wise to keep tabs on these types of accounts to utilise benefits regularly.

3. Include digital assets in your Will and appoint a technology custodian

Your Will should define and identify important digital assets and provide executors and trustees with appropriate directions and powers to deal with them.

Assign your executor, or other trusted person who is familiar with technology, the role of managing your online life after you die and ensure this direction is included in your Will.

Record your after-life technology instructions with respect to each account separately and ensure these instructions are secure, but accessible to your technology custodian. Never disclose passwords in your Will.

4. Online maintenance

Online accounts contain personal information which should be protected. Technology presents a real risk of identity fraud and unmonitored accounts can be particularly vulnerable. Regular monitoring and unsubscribing or deleting unused accounts can help minimise risk and keep your technology life tidy.

Regularly downloading photos and videos from your mobile to a storage device can ensure that memories are accessible to your family when you die.

5. Consider incapacity

It is also important to consider what happens to your online life in the event that you are incapacitated. Appointing a trusted person to manage your online affairs and including specific instructions in an enduring power of attorney is a logical step to ensure the appropriate management of your digital wealth if you are incapacitated.

The instrument making the appointment should be specific to the jurisdiction in which the assets are held, and in this respect, more than one document may be required.

6. Consider trusts

It may also be beneficial to hold substantial digital assets through a trust structure, if possible, for greater protection and better taxation outcomes. In doing so, the trust must be considered and dealt with under the Will, which should nominate beneficiaries of the trust or shares in the trustee company and include provisions to ensure the trust can achieve the desired objectives.


It has become increasingly difficult for executors, lawyers and family members to ascertain and access online assets after a person dies, with many financial and other institutions operating in a ‘paperless’ environment. Certain digital assets such as cryptocurrency can present additional problems for a deceased’s family.

Inaccessible online accounts make it difficult to identify assets, and leaving online accounts open indefinitely raises concerns of potential identity theft.

Good online management and ensuring your digital assets are included in your estate plan will help your executors and family manage your online life after you are gone.

If you or someone you know wants more information or needs help or advice, please contact us on (02) 9963 9800 or via our contact form.

Inheritances and Family Law

Inheritances and Family Law

Families and money can sometimes be a volatile combination. This can be complicated especially in circumstances where a divorce or separation occurs and a new Will isn’t drafted to reflect the change of circumstances. In this blog, we review what it means to have an inheritance included in the asset pool of a separating couple.

Why is inheritance an asset?

When a separating couple needs to divide their assets, they must first work out the pool of net assets available for distribution. The pool includes all the assets and liabilities in each person’s name and in the parties’ joint names, as well as each person’s share of an asset owned jointly with another person.

If one person received an inheritance before or during the relationship, that inheritance would normally form part of the pool of assets available for distribution.

Does that mean my partner gets half my inheritance?

No, not necessarily. Just because an asset is included in the pool of assets available for distribution does not mean that the asset or the whole pool will be divided 50/50. Each matter is considered on a case-by-case basis.

Importantly, once the parties have identified what is in the pool of net assets, they must then consider what contributions they each made, and their respective future needs, in order to determine their respective entitlements and percentage split of the net assets they will each receive.

What are contributions?

When working out which party made what contribution, the Family Court considers the parties’ financial contributions – i.e., who earned what, the lump sums expended during the relationship, who bought what and who paid for what – and also non-financial contributions – such as being a homemaker and parent, physically renovating a home or landscaping a garden, managing the parties’ financial affairs, etc.

After a long relationship where there haven’t been any significant inheritances or other financial windfalls, a court usually finds that financial and non-financial contributions during the relationship are roughly equal, unless special circumstances apply.

An inheritance received by one party before the commencement of the relationship would be treated as an initial financial contribution by that person – i.e., money or assets that person brought into the relationship. Similarly, an inheritance received by one partner during the relationship is usually considered to be a financial contribution by that person.

In these circumstances, depending on factors such as the size of the inheritance, when it was received, what it was used for and the parties’ other contributions, this would generally mean that the person who received the inheritance would be treated as having made greater contributions during the relationship.

What about an inheritance received after separation?

This situation is less clear cut. A court usually considers an inheritance by one party as a sole contribution by that person. Generally, this will usually mean that the other party did not contribute to the post-separation inheritance and it should not be included in the pool of assets to be divided. However, each matter is dealt with on a case-by-case basis and while this may be a potential result, it is always dependent on the facts of the case and the circumstances of the lead up to the inheritance.

For example, if the post-separation inheritance had been received from the husband’s mother and the wife had a close relationship with her mother-in-law and had cared for her during an illness, a court might find that both parties had contributed to the receipt of the inheritance and therefore both parties will be entitled to a share of the inheritance.

Future needs

After working out financial and non-financial contributions, the future needs of the parties are assessed  before determining a split of the net assets and whether any adjustments should be made in favour of the party in need. Future needs include things like income, earning capacity, financial resources, ongoing care of children, age, health, etc.

An inheritance, even one received after separation, may be taken into account in this final step. The reason for this is the recipient of the inheritance would have greater financial resources and may be receiving income from an inherited investment which may well mean that person’s future financial circumstances may significantly outweigh the other person.  In such a case, a court may rebalance the division of the net asset pool in favour of the other partner by way of an adjustment which is derived from section 75(2) of the Family Law Act (Cth).


An inheritance received before or during a relationship will almost always be treated as an asset available for distribution between separating parties, whereas an inheritance received after separation will usually be found not to fall into the main pool of assets but may be treated in a separate pool. However, that does not necessarily mean that the other person is entitled to half the inheritance.

The receipt of a large inheritance will almost always have a significant impact towards the determination of contribution of the parties. In addition, an inheritance, including one received after separation, could have an impact on the determination of future needs of the parties and whether any adjustments ought to be made.

Finally, once the parties have been assessed as to the net assets, what contributions were made, whether there are future needs, a court is then required to determine whether the proposed split of net assets is just and equitable.

Contact us

The Family Law team at Etheringtons Solicitors are skilled at handling all matters relating to inheritances and are able to assist with complex cases in the event of a relationship breakdown. If you need assistance with any area of Family Law, do not hesitate to contact us on 9963 9800 or via our contact form here.