A financial services lawyer has said trustees are underprepared when it comes to SMSF estate planning, with “gaps” in their superannuation structure creating multiple risks.
According to Townsends Business & Corporate Lawyers principal Peter Townsend, the biggest issue in estate planning is a recurrent assumption that a trustee’s will can “handle it all”.
“Just saying in a will that you want your death benefits to be given in a certain way won’t achieve it at all, because it has to be in the form of a binding death benefit nomination which accords with superannuation law,” he told SMSF Adviser.
“If there is no binding death benefit nomination then the remaining member trustee has the right to decide where the death benefit goes… which can cause major problems, especially in blended families.”
According to Mr Townsend, trustee incapacity is also an overlooked part of the estate planning process and can result in a trustee losing their role in an SMSF, thereby being at the mercy of other members of the fund.
“One minute everything is going along solidly, and you think 'I am going to live till 85 and have a wonderful retirement', and then 10 seconds later you have a stroke and everything changes overnight,” he said.
“You have to ignore the ‘likely’ result and instead deal with a ‘possible’ result, which means setting up structures to handle trustee incapacity at the very time the SMSF is set up. That way there are no gaps,” he said.
Mr Townsend believes corporate trustees are strongly favoured “no matter what” for the simple reason that they “don’t die”.
“Individual trustees unfortunately have a way of dying and when that happens any assets that they held in their name… have to then be transferred into the name of the new individual trustee,” he said.
“That transfer can be expensive, time-consuming and administratively cumbersome. If you have a corporate trustee you don’t have that problem.”
SUBSCRIBE TO THE SMSF ADVISER BULLETIN
- 26 Sep 2017ATO set to add new items to SMSF watch listBy Katarina Taurian
- 26 Sep 2017ATO tipped to scrutinise property development and unit trustsBy Jotham Lian
- 26 Sep 2017Statistics reveal full impact of events-based reportingBy Staff Reporter
- 26 Sep 2017Tax advice exemption discrepancy driving away accountantsBy Jotham Lian
- 26 Sep 2017Consultant flags strategies to negate complex ECPI calculationsBy Miranda Brownlee
- 25 Sep 2017Survey results point to major concerns with new reportingBy Miranda Brownlee
- view all
- ATO tipped to scrutinise property development and unit trusts
One big four accounting firm says the ATO has started to zoom in on property development in unit trusts being held in SMSFs and the calculat...read more
- Statistics reveal full impact of events-based reporting
Analysis conducted by SMSF software provider BGL Corporate Solutions has indicated that around 290,000 SMSFs will be affected by the events-...read more
- Tax advice exemption discrepancy driving away accountants
A discrepancy in ASIC’s treatment of licensed and unlicensed accountants in relation to the tax advice exemption instrument is driving acc...read more
- view all