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Succession planning for SMSFs

A mandatory component of managing a self-managed super fund (SMSF) is planning out what will happen to the fund if its trustee was to pass away.

While succession planning may not be one of the first responsibilities that comes to mind when managing an SMSF, it is a necessity that can provide certainty and peace of mind for a deceased trustee’s family.

It is also especially important in cases where one trustee, for example, a husband, takes a more active role in the management of an SMSF than his wife and fellow trustee, and wants to reduce any potential burdens involved in the fund’s administration and compliance if he was to pass away.

Succession planning can become quite complex if little or no attention is paid to it on an ongoing basis, but there are ways trustees can ensure the best outcome for both the fund and their family.

One option for a sole member fund is to appoint another trustee. Please note that the non-member trustee cannot be the employer of the member unless they are related. This would not be an option for a fund with two members as the available exemptions only apply to single member funds.

Those who appoint a family member or close friend must consider first whether they are suitable for a role; running an SMSF requires expertise and knowledge, and appointing someone with limited experience may not be in the best interest of the fund’s future.

Some SMSF trustees may also choose to appoint an enduring power of attorney. An enduring power of attorney is someone who makes decisions on the trustee’s behalf, if they become incapacitated or pass away. Common power of attorneys include accountants, financial advisors and lawyers; basically those who understand SMSF management and the associated challenges.

Another option is to have a binding death benefit nomination (BDBN) in place. Since a person’s superannuation does not make up part of their estate and is therefore not automatically covered by their Will, a BDBN is often a good solution to help with the distribution of super member benefits.

There are alternative strategies that may be more appropriate than an SMSF, depending on your individual financial situation. As usual any investment decision is best made with the input of an appropriate financial advisor.

Posted on 23 November '16 by , under Super.

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What to consider when consolidating your super

The ATO reported that 45% of working Australians were not aware that they had multiple super accounts in 2016. Having multiple super accounts is particularly common for individuals who have had more than one job. If this is you, it is important to identify and manage your super accounts because having more than one can be costly as a result of account fees from multiple funds.To combat this, you may want to consolidate your super, which moves all your super into one account. Not only does this save on fees, but it also makes your super easier to manage and keep track of.

Before consolidating your super, it is important to do the following:

Research your funds' policy
Compare your active super accounts so you can make the right choice about which one you should close. Things to assess include:

  • Exit fees
  • Insurance policies
  • Investment options
  • Ongoing service fees
  • Performance of the funds

Check employer contributions
Changing funds may affect how much your employer contributes, as some employers contribute more to certain funds. Check your current accounts to see if changing funds will affect this. Once you have selected a super fund, regardless of whether you choose a new super fund or one of your existing ones, provide your employer with the details they need to pay super into your selected account.

Gather the relevant information
When consolidating your super, you will need to have the following details ready:

  • Your tax file number.
  • Proof of identity. This could include your driver's license, birth certificate or passport.
  • Your fund's superannuation product identification number (SPIN).
  • Your fund's unique superannuation identifier (USI).
  • Details of your previous fund.

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