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Succession planning for SMSF trustees

A responsibility that does not immediately spring to mind when managing a self-managed super fund is working out what will happen if a member becomes incapacitated and unable to perform their trustee duties.

Succession planning for an SMSF can become quite complicated if not managed on an ongoing basis. It not only requires having a plan; trustees also must stay in touch with Australian superannuation rules as time passes.

Finding a replacement trustee can be difficult, and since appointing a replacement trustee, whether as an individual trustee or director of a corporate trustee, gives that person control over the super fund’s assets; particularly its investments and bank accounts, trustees should choose wisely.

Some may opt to appoint an enduring power of attorney (EPoA) as a replacement trustee. An EPoA is someone who is appointed to look after a member’s interests if they can’t do it themselves and can assume the member’s responsibilities (if that is how the fund is structured).

However, for an EPoA nominee to be appointed, legal documents i.e. the succession documents appointing the replacement director must be in place before the member loses their capacity to be a member.

A common misconception surrounding SMSFs is that a trustee’s legal personal representative (LPR) who is appointed under an EPoA can immediately assume the role of trustee of a self-managed super fund.

This is not entirely true, and ultimately depends on the provisions of the fund’s trust deed and whether there are appropriate legal documents in place to make this happen.

Essentially, a fund’s trust deed and corporate trustee company constitution should include the ability to easily appoint a successor trustee or director who assume the role of a member, should that member lose the capacity to perform their trustee duties.

Posted on 15 March '16 by , under Super.

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Transition to retirement

The transition to retirement (TTR) strategy allows you to access some of your super while you continue to work.

You are able to use the TTR strategy if you are aged 55 to 60. You can use it to supplement your income if you reduce your work hours or boost your super and save on tax while you keep working full time.

  • Starting a TTR pension: To start your TTR pension, transfer some of your super to an account-based pension. You have to keep some money in your super account so that you can continue to receive your employer's compulsory contributions as well as any voluntary contributions you may be making.
  • Government benefits and TTR: The benefits you or your partner receive might be impacted if you choose to opt for this strategy. How and what exactly will change might become clearer upon discussing this with a Financial Information Service (FIS) officer.
  • Life insurance and TTR: In some cases, the life insurance cover you have with your super may stop or reduce if you start a TTR pension – check this before making any decisions or changes.

TTR can help ease your mind as you transition into retirement but it can be a bit complex. Before you choose whether you want to use TTR to reduce work hours or save on tax, or even if you want to use TTR altogether, you should figure out how this will impact all aspects of your finances.

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