A Self-Managed Super Fund (SMSF) is a private superannuation fund in which the SMSF trustee has control over retirement funds. The trustee manages the retirement benefits of its members by deciding:
- The amount of money invested into the SMSF;
- The way in which funds are invested;
- How and when members can receive their benefit; and
- Who receives a member’s fund balance when they die.
If you lose the capacity to be involved in your SMSF, the trustee may allocate your funds however they choose. To ensure your SMSF benefits are distributed in accordance with your wishes, you must have a valid succession plan.
What should be included in my SMSF succession plan?
1. A valid Will
You must have a legally valid Will that appoints your executor. The executor of your Will can ensure the SMSF trustee carries out your wishes for your super after you have died.
2. A valid Binding Death Benefit Nomination
A binding death benefit nomination will tell your trustee how and to whom you would like your super balance paid.
If you do not have a binding nomination, the trustee can use their discretion to decide which dependant to pay the death benefit. The trustee can also make a payment to your executor to distribute your funds according to the instructions in your Will.
To learn more about superannuation death benefits, please refer to the Australian Taxation Office website.
3. A General and Enduring Power of Attorney
While you have mental capacity, a general power of attorney will appoint someone to complete specific SMSF tasks on your behalf.
If you have lost mental capacity, an enduring power of attorney will appoint someone to make legal and financial decisions on your behalf. To know what you need to consider when choosing an attorney, please refer to our blog.
If you do not appoint an enduring attorney, your super can be allocated at the direction of the trustee when you lose mental capacity. This means that your super fund balance can be given to another beneficiary of the trustee’s choosing.
If you are the sole member of the SMSF and have not appointed an enduring attorney, the fund may freeze-up until a financial management application to the NSW Civil & Administrative Tribunal is successful.
4. A SMSF Deed
Your appointed attorneys should be recognised in your SMSF Deed in order to be authorised as your legal representatives.
If your SMSF does not authorise your attorneys, they will not be able to manage and protect your super on your behalf. This can result in unforeseen capital gains tax or stamp duty fees which can disrupt your investment and retirement planning.
Seek legal advice
Your SMSF should be carefully considered in your succession planning. If you do manage your super carefully, your death benefits will not be allocated according to your wishes. If you need assistance with creating a Will, creating a binding death benefit nomination, appointing an attorney or creating a SMSF Deed, we recommend seeking professional advice.
To discuss your SMSF and estate planning matter with an experienced Wills and Estates lawyer, please contact Etheringtons Solicitors in North Sydney on (02) 9963 9800 or via our contact form.