Why SMSFs want estate-planning advice

An estimated 77,000 self-managed super funds (SMSFs) have unmet needs for advice on estate planning.

 

The 2018 Vanguard/Investment Trends SMSF Report confirms that estate planning is among the highest unmet needs for advice. This equates to 13 per cent of SMSFs at the time of the surveys – a percentage that would be markedly higher among funds with older memberships.

Further, the research found that 10 per cent of SMSF trustees had concerns about the ability of other members to manage their super funds following the death or serious illness of the most dominant fund member.

The recognition of tens of thousands of SMSF trustees that they need professional guidance with their estate planning is driven by an array of factors. These include the burgeoning number of baby boomers nearing or already in retirement, the large proportion of retirement money held by SMSFs, and greater longevity.

Some 47 per cent of SMSF members were aged over 60 in March 2018 and 20 per cent were aged over 70, according to tax office statistics released over the past week.

SMSFs hold almost 60 per cent of overall superannuation assets invested in retirement products, according to the Superannuation market projections report 2017, published late last year by consultants and actuaries Rice Warner. This percentage has been rapidly growing.

As at least a starting point for estate planning, it is critical for SMSF trustees (together with all super members) to understand who is eligible to receive their superannuation death benefits. Another fundamental is to understand how different eligible beneficiaries may be taxed differently.

Superannuation benefits cannot be left indefinitely in an SMSF following death – even if the beneficiary is your surviving spouse and a member of the same SMSF. The amount must be paid out as a lump sum or continue to be paid as reversionary pension.

As part of their estate planning, many SMSF trustees prepare for the possibility that the most active member of a fund dies first. This is particularly an issue for two-person SMSFs where one member may be much more involved with their super.

Changes to superannuation laws provide a further motivation for SMSFs to gain estate-planning advice.

Specialist superannuation editor Stuart Jones writes in the Thomson Reuters Australian Superannuation Handbook 2017-18: "From July 1, 2017, estate-planning considerations have been further complicated by the introduction of a pension transfer balance cap.

"The death of a member in the pension phase," Jones adds, "is a high-risk time for a surviving spouse (or other dependant) in terms of their potentially breaching their own $1.6 million transfer balance cap."

A surviving spouse or dependant who had previously been well below the $1.6 million pension cap could "quickly find themselves" exceeding the $1.6 million cap with an excess transfer balance tax liability because of the deceased's super pension, he says.

Thorough estate planning by an SMSF and its members is a valuable legacy in itself.


 
Written by Robin Bowerman, Head of Corporate Affairs at Vanguard.
22 June 2018
www.vanguardinvestments.com.au

 

 

Any advice contained in this website is of a general nature only and does not take into account your circumstances or needs. You must decide if this information is suitable to your personal situation or seek advice.

Rolanda has been my financial adviser for 20 years. I have always found her to be highly intelligent, knowledgeable and professional in her career. Rolanda is accessible at all times and patiently explains terms that I do not fully understand. I can highly recommend Rolanda and it is a pleasure to do so. I do this with the utmost confidence. Marcia Montgomery (Retiree – home duties and ex-clerk with Water Board)
I retired Oct 2012, and seeking Financial Advice for my retirement funds, I decided to have Rolanda look after my financial affairs, and so happy I did. Since my retirement I am extremely comfortable with Rolanda’s advice, experience and strategies and the returns on my investments. Rolanda is my "Breath of Fresh Air" at this stage of my life and she makes herself available 24/7 should you need to talk with her. Steve Hoad (Ground Engineer, Qantas)
In 1997 I left Energy Australia and decided to join Rolanda Adams Financial Services for the financial support and advice that I would need into the future. That decision has proved a very good one and I am still with Rolanda who has given me advice and friendship over those many years. The advice given has ensured that my investments have been protected and the major losses, of some, during the GFC was not felt by me unduly. Rolanda and her team are very easy to contact at any time and one is always received in a most professional manner. I would be most happy to recommend Rolanda Adams Financial Services to all who need financial services. Graham Fleeton (Manager, Property Insurance Group Energy Australia (Ausgrid))
Rolanda has been my Adviser for the past 18 years. Through her wide industry experience and professional expertise she has ensured the sound development and ongoing management of my investments. Her advice has invariably been sound, timely and entirely tuned to meet my personal needs in retirement. She has a friendly, engaging manner and is always readily available to address any of my concerns. I have no hesitation in recommending her. Neil O'Keeffe (Chief Inspector (retired), Australian Customs Service)

© 2021 Rolanda Adams Financial Services Pty Ltd. All rights reserved. Site by PlannerWeb.