Super Advisor

Superannuation and Real Estate

Estate Planning with SMSF

Did you know that the provisions of a SMSF trust deed take precedence over any instructions given in a will?

There is much confusion about superannuation in estate planning, this confusion can result in estates paying unnecessary tax, and superannuation balances being distributed differently, than what the member had intended.  

As SMSFs are not directly owned by the member, the member cannot rely on a Will to ensure their intentions are carried out as they wished. This is why you need a Binding Death Benefit Nomination as well as a Will.

SMSF’s allow for a number of strategies to exist when it comes to estate planning. For example, death benefits can be paid as a pension to a “death benefits dependant” (such as a spouse, child under 18 or another financial dependent),  rather than as a lump sum, so the fund does not have to realize investments and be wound up. Alternatively, SMSF could pay the balance to a specific beneficiary as a pension without giving them access to the capital (providing this is allowed in the trust deed).

It is also important to note, that unless the recipient is considered to be a death benefits dependent, tax may be payable on the distribution.  For this reason, whenever appropriate, superannuation balances should be paid to death benefits dependants.

In the case where the SMSF has, for example, two parents and two children, it can be a good tool to tax effectively facilitate intergenerational wealth transfer. For example, parents can take a pension out of the SMSF and gift it to children (within contribution limits), then recontribute it back into the fund in their own name.  This can assist in circumstances, such as keeping a family business property in a family SMSF even after the death of a key member of the fund.

Another advantage of a SMSF is that death benefits can be paid in-specie, meaning non-cash assets can be transferred directly to a beneficiary. This can be handy for unlisted or liquid assets such as a property, or even listed assets such as shares. (Stamp duty may apply).

If you have any questions, contact Super Advisor for more information on estate planning within your SMSF.

Disclaimer: The above information is provided for general informative purposes only, and does not take into account individual objectives, legal and tax circumstances and needs. The information can in no way, be used as a substitute for legal, tax and financial product advice. Before making any decisions, you should seek individual professional advice to take into account your personal circumstances before proceeding. Super Advisor Pty Ltd does not warrant the above information to be complete and all encompassing, nor relevant to every situation. No warranty is given as to its accuracy and persons who rely on this information do so at their own risk. The information provided is not to be considered financial product advice for the purposes of the Corporations Act 2001.

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