SMSF trustees are failing to correctly structure deathbed payments as they remain unaware of the scope of issues involved, which creates an opening for advice practitioners to proactively create strategies for their use, according to an SMSF legal expert.
Cooper Grace Ward partner Clinton Jackson said SMSF members looking to make a deathbed payment were able to do so if they were retired and able to draw down their superannuation entitlements, could do this in a tax-free way and it was consistent with the purpose of super.
“If we’ve got clients who are trying to withdraw super on their deathbed to avoid death benefits taxes, then there’s a very specific process that you need to follow,” Jackson said during the firm’s recent Annual Adviser Conference.
He noted where SMSF trustees and members have tried to implement these strategies, many were aiming for the right outcomes but failing to achieve them due to the significant amount of detailed work involved in the process.
To illustrate this, he pointed out fund members needed to know who was making the request for a payment and if someone else needed to be appointed to take charge of the fund to make a payment request if there was only one member.
He added where someone was acting on behalf of a member that this needed to be made clear and was also consistent with the fund’s deed and enduring power of attorney. Whether sufficient cash was available to make a payment or whether a large non-cash asset needed to be sold within the fund also needed to be determined, he said.
“The point of all this is what can we do now? If we are talking with clients about this as a possible strategy or our clients are talking to us about avoiding death benefits taxes, what can we do now?” he said.
“Are there things that we need to do to update the trust deed or sell down assets in advance so that we can avoid some of the issues associated with implementing one of these decisions at the last minute?
“If we knew when we will die, I think everyone would be in a much better situation, but we don’t, so these decisions and processes need to be implemented in a very short period of time, so anything we can do in advance is always a good idea.”
