Advisers must look to cover off three elements that are crucial to providing proper strategic advice for their SMSF clients, a business consultant has said.
“Every single self-managed super fund trustee needs to do three things. They need to look at control, they need to look at incapacity and they need to look at estate planning,” SMSF Design co-founder Tracey Besters told the recent Accounting Business Expo in Sydney during a session hosted by Class.
Besters said the concept of control revolved around who the SMSF trustees wanted to make decisions for them should they become incapacitated.
She pointed out control is well documented as being one of the prime motivating factors of establishing an SMSF and as such, losing control may make the exercise meaningless.
“I’m not saying in these circumstances you should wind it up, I’m just saying that you should have a control mechanism in place,” she said.
In regard to incapacity, she suggested advisers needed to implement a strategy that determined what the SMSF trustees wanted the fund to do or provide should they be temporarily or permanently incapacitated and unable to run the fund.
When addressing this type of strategy, she recommended advisers divide clients into an under 65 bracket and an over 65 group.
“When we’re talking about incapacity planning for people over 65, we’re really wanting to understand from the members of the super fund what do they want the super fund to provide from an aged-care perspective,” she said.
“For those under 65 it’s about how they want to fund a temporary incapacity payment – a non-commutable income stream on temporary incapacity,” she added.
“So we’ve got to put these elements in place.”
When looking at the third crucial item, estate planning, she emphasised strategic advice addressing this area was more intricate than putting a binding death benefit nomination in place.
“We need to understand what the members want, we need to understand what their family structure looks like, and we need to understand what chunk of money is going to be there in terms of estate planning,” she said.
In addition, advisers needed to overlay the newly legislated super reforms into any estate planning strategies to take into account the new transfer balance cap, she said.
