There are various estate planning strategies advisers need to discuss and facilitate with their clients to avoid severe financial consequences.
The issues of clients’:
• payment of superannuation death benefits,
• powers of attorney and guardianship in preparedness for incapacity,
• SMSF trust deed review examining trustee powers in the event of an SMSF estate disaster
• Wills and whether they ‘fit’ with the requirements of the clients superannuation death benefit payments
• ability to instigate strategies to mitigate the “death tax” when superannuation death benefits are eventually paid out to the next generation.
does not get the attention it deserves.
There are now in excess of 500,000 SMSFs with over one million SMSF members. SMSFs continue to grow rapidly on a monthly basis. However, 54 per cent of SMSF members are in pension mode. There is a massive amount of wealth harboured inside SMSFs.
In the next 20 years this country shall witness the greatest transfer of wealth it has ever known.
The SMSF industry catchcry and mantra is that project managing estate planning, inclusive of the payment of superannuation death benefits, is the current growth area of the industry. As a professional who is at the coal face dealing with clients on a day to day basis this area of practice receives merely lip service.
Surely assisting clients with their day to day affairs includes assisting them in determining what happens to their wealth when they are no longer here. What is required is guidance and assistance in this complex forum.
The lack of attention paid to the vital issue of SMSF estate planning is a blight on the SMSF industry. Many an adviser has the best of intentions with their clients’ affairs and they are “Gunnadoo” this essential process given the next opportunity. This opportunity unfortunately never comes.
The provision of financial advice is more than saving tax and accumulating wealth for clients. It is holistic. Making sure that a client has the appropriate SMSF estate plan is also the responsibility of the adviser.
For the client themselves they are enthusiastic about wealth accumulation, saving for their retirement, planning for holidays, buying a new car, going to the beach, spending time with friends and grandchildren, going to the footy. But what is to happen with all their superannuation savings when they die? If they become incapacitated during their lifetime who will control their superannuation and pay the bills?
Why won’t many a client confront the issues described in this article? Many don’t want to discuss it. It is too hard, takes too long or is too challenging or confronting.
The clients proceed through life ignorant of the fact that unless the succession for their SMSFs is in place they will leave a potential massive problem to the next generation. Surely they are entitled to know what should be done?
It is the “primary financial advisers” role is to do more than simply advise on the financial life of the client. They must assist their clients with the final step of their clients’ financial lives – the payment of their death benefits. The client must be told they can’t make provision in their will as to the manner that their death benefits from superannuation will be paid.
Clients need to be educated as to who can receive their superannuation when they die and the manner it can be paid. Is it to be cash or in specie? No, it can’t be paid directly to a charity or their grandchildren unless there are exceptional circumstances.
Advisers don’t have to solve clients’ SMSF estate planning problems. All they need to do is identify them and work in concert with the appropriate lawyer to prepare the appropriate plan. The adviser as the “project manager” should be visibly seen by the client as the driving force that eradicates their problems.
With the onset of FOFA and the “fee for service” regime estate planning generally should be a vital source of revenue for the adviser.
Advisors should not shy away from the SMSF estate planning forum they should embrace it. Establish the process of planning with the client for the payment of superannuation death benefits or incapacity as an income generating regime.
Every client of an adviser should have a well documented SMSF estate plan.
Is your practice “Gunnadoo,” or a place of proactive advice and assistance for clients? Make sure it’s the latter. Put in place systems and processes that provide a holistic service to clients that covers their entire financial lives even for when they are no longer with us.
Ian Glenister, principal of Glenister & Co Superannuation and Estate Planning Lawyers
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