SMSFs can act as an effective vehicle for the transfer of wealth across generations if the estate planning aspect of these funds is properly put in place, according to a wealth management accountant.
HLB Mann Judd head of wealth management Michael Hutton said this can be achieved when an SMSF is comprised of family members such as parents and two children.
“Such SMSFs can be a good tool to facilitate intergenerational wealth transfer tax effectively,” Hutton said.
“To achieve this, parents who do not need all of their superannuation can take a pension out of the SMSF and gift it to children, who can then, within contribution limits, recontribute it into the fund in their own name.
“Such planning can help in a number of situations, such as allowing a family business property to remain in a family SMSF even after the death of a key member of the fund.”
He warned trustees no advantageous SMSF estate planning strategies could be established if individuals relied only on their general will upon their death.
“Anyone leaving a large superannuation balance cannot rely solely on a will to ensure their intentions are carried out,” he said.
“To allow them to implement the best strategy they must understand the tax implications of balances paid out to non-dependants, amend the SMSF trust deed if necessary and have a death benefit nomination, as well as a will.
“Unlike other assets, superannuation is held in trust and is not owned directly by the member of the fund.
“Consequently it usually falls outside the scope of a will.”
It was important for SMSF members to get a better understanding of the superannuation estate planning rules to ensure their benefits were distributed as per their wishes upon death, he said.
