Estate Planning

SMSFs delay estate planning until incapacity

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SMSF trustees are delaying estate planning until loss of capacity, according to Australian Unity.

SMSF trustees are postponing their estate planning until they experience loss of capacity, by which time it might be too late, according to Australian Unity.

Australian Unity Trustees wills and estates accredited specialist Anna Hacker said that just because trustees had established SMSFs with complex structures, it did not necessarily mean they had taken care of their estate planning affairs.

Neglecting this element until the trustees experience loss of capacity could bring with it various difficulties from the perspective of the individuals in question.

“Generally the reason people have an SMSF is because in our experience they want to have control of the investment side. They want control of that,” Hacker told a media briefing yesterday.

“If they’ve lost capacity, it doesn’t necessarily seem like something that needs to continue to operate. So the problem then is though if they have a family or a business in there, we have to continue operating it for that reason.”

Families had expressed they did not know how to deal with this element, but continued to act as trustees for the SMSFs. Hacker admitted not knowing what she could change in those circumstances.

She noted trustees favoured SMSFs for a sense of independence and control of their retirement savings.

“Problem is if you appoint the wrong people to help you if you lose capacity or you don’t make sure it’s properly structured so it can protect you if you lose capacity, it’s quite easy for people to come in and take control of it,” she warned.

“It’s a real minefield and I think that it’s something we’re going to see more and more because people are willing to take control of things when they have capacity, but they’re not thinking of what’s going to happen when they lose capacity and who they should put into those roles in the most appropriate way.”

Australian Unity Trustees executive general manager Emma Sakellaris said financial advisers went through a phase 15 to 20 years ago where they established as many SMSFs as possible, and those trustees and members were now in their 60s and 70s.

“It was actually quite a poor strategy because for the people who really benefit from them, that’s fine, but there are a lot of clients who we see that have got them for no reason,” Sakellaris noted.

“Those clients that [established an SMSF then] are now reaching that stage of losing capacity. I mean, super is a minefield.”

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