Jason Hurst, a technical superannuation specialist and commentator for the Knowledge Shop, said in a recent webinar there are specific considerations that advisers need to look at as they move forward with ageing clients.
“Clients may have an SMSF because they’ve held business property or other property or even unlisted investments and they get to a certain point in their life where they might want to simplify things,” he said.
“In some cases, we may look to other superannuation products or retail products.”
The death of a partner is something that needs to be planned for, he said, although that may not necessarily be solely an age-related event.
“When one member of a couple passes away, perhaps the other member was more passionate about the SMSF and that can be a trigger [to change things],” he said.
“It’s also important to think about multi-member SMSFs, especially with the regulations that saw the maximum number of members rise from four to six.”
Despite the growth in younger people establishing an SMSF, advisers traditionally have an older client base, he said.
“We’re looking at two-thirds of members being over 55 currently and around 30 per cent of those members being 70-plus years old.”
He added that life expectancy has also improved and while physical health may be good, cognitive issues are still a factor in dealing with an ageing client base.
“The starting point for all SMSF members is that they should have an enduring power of attorney,” he said.
“It’s an important document that gives someone control over a member’s affairs if they lose capacity.”
He continued that an enduring power of attorney is different to a general power of attorney as it continues when a person loses capacity.
“We need to look at things holistically when we have an SMSF. It’s not just enough to say ‘I’ve got a will and I’ve got a power of attorney and I’ve got some superannuation nominations’,” he said.
“We need to also consider those things in line with other SMSF documents.”
Mr Hurst said advisers need to look at the investment strategies of their SMSF clients as some people may want to simplify things as they get older.
“Perhaps there’s no property in the fund anymore and it’s a relatively simple mix of investments and things like shares, cash, term deposits,” he said.
“There may be opportunities to save a little bit of money for our clients by having a retail super fund instead.
“However, if the fund does continue to hold property or unlisted investments then generally we would have to have the SMSF, but it’s always good to have that conversation based on what investments the fund is holding.”
Mr Hurst said many court cases over more recent years have revolved around blended families and estate planning issues, and although it may be an uncomfortable conversation to have, advisers need to raise the issue with their clients, sooner rather than later.
“It could be that some people in blended families could be in two SMSFs, and although there’s a cost there, it could be a consideration,” he said.
“In other cases, one member of the couple might have an SMSF and the other one might be okay with having the retail fund.”
He added when establishing an SMSF it’s important for advisers to ensure their clients understand what may happen if a dispute occurs.
“Clients need to understand how the whole structure of an SMSF will tie in with estate planning. They need to know it is more than just a will or power of attorney or even a nomination,” he said.
“Advisers need to explain how all the pieces of an SMSF fit together and look at the wholistic side of advice.”
