Regardless of the size of your superannuation benefits, it is vital that you sort out your estate plans to ensure that you have a well-prepared estate plan so that the right assets go to the proper beneficiaries. You need to ensure that you get holistic estate planning advice and have arrangements to review your estate plans regularly. Estate plans are not to be set and forgotten.
First and foremost, it is essential to understand that the payment of your superannuation death benefits is covered by the rules of your SMSF trust deed and does not automatically form part of your Estate for distribution under the terms of your Will. As trustee of your SMSF, you will need to make sure that you have read and understood your SMSF’s trust deed and that you comply with it at all times.
On your death, one option is to rely on the SMSF trustee’s broad discretion to determine who, within the operation of the law, will receive your death benefit and how much each beneficiary will receive. The alternative is to remove the trustee’s discretion which gives you greater control in deciding how your superannuation death benefits will be cashed. For example, this may be relevant if:
Subject to the specific terms of your SMSF trust deed, ways in which you could consider removal of trustee discretion include:
To ensure that your death benefits are cashed in accordance with your wishes, it is critical to ensure that your estate plans are comprehensive and that you understand the ownership and control of your assets on your death. It is also important that any superannuation death benefit advice you receive is consistent and complimentary to your overall estate plans and is not in isolation to the other.
At a minimum, we recommend that trustees have their SMSF trust deed reviewed to ensure maximum flexibility when dealing with death benefit payments. It is also recommended that this be done alongside a review of any BDBN(s) to ensure that they are valid and provide certainty in how death benefits will be dealt with upon your death.
When considered in light of an ageing Australia, the value of assets invested in SMSFs and recent court cases, having the correct SMSF documentation and process is essential to minimise the risk of litigation from disappointed beneficiaries to allow a safe passage of death benefits to your intended beneficiaries.
So what should form part of a comprehensive SMSF estate plan? At a minimum, it should contain the following:
How can we help?
If you would like to discuss any aspect of your estate plans, please book a chat so that we can discuss your particular requirements in more detail.
Pete is the co-founder and oversees the investment committee for Pekada. He is a qualified financial planner with 17 years of experience. Based in Melbourne, Pete is on a mission to help everyday Australians achieve financial independence and the lifestyle they dream of. Pete has been featured in Australian Financial Review, Money Magazine, Super Guide, Domain, American Express and Nest Egg.