Beware shortfall of a will in SMSF planning

By Cameron Micallef

February 18 2020
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Despite superannuation being the largest asset most Australians hold, many are not prepared on how to pass it on to the next generation, an industry expert warns.

In a conversation with nestegg, Hall & Wilcox senior associate Sam Baring explained how SMSFs members need to take precaution in passing on their money.

“It's a separate trust or function that needs to be dealt with very separately from their will. I think some people don’t understand that and think it forms part of their estate,” Mr Baring said.

“That preconception that you don’t have to separately deal with your superannuation needs to be busted.”

He warned SMSF holders that the trustee has enormous powers when it comes to deciding who gets what, meaning it is vital to choose the right person.

“In terms of a SMSF, the trustees of the fund make a determination as to where the superannuation should be paid, factoring in all beneficiaries and their financial situation,” Mr Baring said.

“[In this situation] it is largely taken out of your hands and it’s people making that assessment without necessarily your intentions in mind.”

The lawyer explained that having a really clear and strong estate plan that deals with all the issues that might arise, with a lot of family situations that could be at play.

“For instance, there’s a classic case of a blended family where the benefits of the first to die intend to pass to the children from the first marriage,” Mr Baring said.

“Some useful strategies might be to ensure there’s a binding death benefit in place and you might have a child or independent person appointed as a director and they become a shareholder involved in decision making.”

Mr Barring highlights that even members who are not anticipating issues should plan their estate to ensure their wishes are met.

“As a general rule, everyone should be making sure they thoroughly review their superannuation details irrespective of whether they see an issue or not,” he said.

“Don’t take for granted that your superannuation is just dealt with. A lot of people can’t really remember signing a nomination or having really given it a great deal of thought. They just think their superannuation forms part of their estate and that is something that doesn’t happen.”

When that is in many instances the largest assets you have, some due diligence is required, Mr Baring concluded.

About the author

Cameron Micallef

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

About the author

Cameron Micallef

Cameron is a journalist for Momentum Media's nestegg and Smart Property Investment. He enjoys giving Aussies practical financial tips and tricks to help grow their wealth and achieve financial independence. As a self-confessed finance nerd, Cameron enjoys chatting with industry experts and commentators to leverage their insights to grow your portfolio.

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Retirement