Conversations about the trustee structure of an SMSF are complex and need to happen while all the existing members are alive and of sound mind, a sector specialist has said.
“You can choose to change the structure of your trustees or you will be forced to at some point when you have change, whether that be at death or other matters that require a change in trustee,” Crowe Horwath SMSF and superannuation principal Kath Evans told a recent SMSF Association Sydney Chapter breakfast.
“I’ve been having that discussion more and more regularly with clients and the line I use is it’s always better to do it while you are both around and of sane mind.
“[This is] because then you have the choice of what you do, you’re aware of the documentation you’re putting in place, and you have the time to do the planning and have the discussion among the trustees with the relevant professional involved who understands who to talk to, where you go if there’s a death of a member.
“I think that’s really critical when you’re dealing with your clients because sometimes those discussions aren’t the easiest ones to have, but they are really important.”
Drawing from personal experience, Evans said once a member had died was possibly the worst time to address the situation.
“It’s not the technical piece and it’s not reading the legislation [that’s difficult], it’s dealing with the client across the desk when you have a grieving widow,” she said.
“[In one of these situations] I just felt I was continually putting in front of her [the message] ‘remember your husband just passed away so you’ve got to sign another piece of paper’.
“Emotionally for her it was very draining and we’ve got to do better for our clients than that.”
She said that experience was the time she decided to conduct the difficult conversations about SMSF trustee arrangements upon the death of a member well before an event like that could happen.
In her experience, most clients were willing to talk about it well before the passing of a trustee due to the peace of mind it afforded them, she said.
