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Retirement

Experts say risks of a rushed DIY trust or SMSF overshadow the returns

  • December 07 2021
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Retirement

Experts say risks of a rushed DIY trust or SMSF overshadow the returns

By Fergus Halliday
December 07 2021

Legal disputes are on the rise when it comes to trusts and self-managed super funds.

SMSF

Experts say risks of a rushed DIY trust or SMSF overshadow the returns

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  • December 07 2021
  • Share

Legal disputes are on the rise when it comes to trusts and self-managed super funds.

SMSF

While more and more Aussies are looking to take control of their financial future, they’re making the same mistakes and afoul of the same pitfalls.

According to Equity Trustees national manager for estate planning Marie Brownell, the rise in DIY or off-the-shelf trusts has come hand-in-hand with a rise in legal wrangles for those involved.

Australians are a nation of DIY fanatics but trusts are complex legal structures and not something anyone should create without specialist legal advice,” she said.

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Ms Brownell bemoaned the reality that it was all too common for accountants to offer clients of an off-the-shelf trust when asked for advice on minimising tax, rather than a more bespoke option that has been properly drafted for a client’s needs and circumstances.

While there are many good reasons to consider establishing a trust, it’s important to do it right.

In order to establish a trust that is suitable for your current and changing circumstances, as well as those of your loved ones, always get proper legal advice, ensure you have a good succession plan for who is going to control the trust on death or incapacity and never sign anything you don’t understand,” Ms Brownell recommended.

Taking shortcuts here can yield courtroom headaches in the long run.

Ms Brownell noted a similar set of dynamics at play when it came to Australia’s burgeoning self-managed super fund sector.

As a result of the proliferation of SMSFs in Australia, we are seeing more SMSFs challenging trust decisions as a result of trustees acting negligently, incompetently or even fraudulently,” she said.

As with trusts, it’s critical that those looking to set up a self-managed super fund understand the rules they’ll need to comply with.

Ms Brownell warned that many of those who choose to go the SMSF route forget that superannuation death benefits do not automatically fall into the estate for distribution in accordance with the will. 

“In the absence of a binding death benefit nomination, the trustee of the fund will decide who gets the benefit,” she explained.

Another point that’s often overlooked is how that trustee is determined.

“If it’s someone who stands to benefit themselves, in a manner contrary to your wishes, then you need to carefully consider what steps you need to take to ensure your death benefit is paid as you intend,” she suggested.

Experts say risks of a rushed DIY trust or SMSF overshadow the returns
SMSF
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About the author

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Fergus is a journalist for Momentum Media's nestegg and Smart Property Investment. He likes to write about money, markets, how innovation is changing the financial landscape and how younger consumers can achieve their goals in unpredictable times. 

About the author

author image
Fergus Halliday

Fergus is a journalist for Momentum Media's nestegg and Smart Property Investment. He likes to write about money, markets, how innovation is changing the financial landscape and how younger consumers can achieve their goals in unpredictable times. 

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