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Succession planning for your SMSF

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

Succession planning can become 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. 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; people who understand SMSF management and the associated challenges. For an enduring power of attorney 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.

Posted on 28 August '19 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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