Six-member funds trustee training ground

six-member funds

Six-member funds will be a useful tool to prepare adult children taking over a fund from a parent who has lost capacity.

The introduction of six-member funds has given older parents an opportunity to prepare children to take responsibility for the operation of their fund in the event one of them loses capacity, according to an SMSF administrator.

Heffron managing director Meg Heffron said while six-member funds appeared to many in the SMSF sector as a solution looking for a problem, the large volume of contact from clients regarding the inclusion of adult children in a fund has shown older members see their value as a planning tool.

“The six-member fund gives families an opportunity to gently transition control within their family,” Heffron said during a presentation for the Heffron Super Intensive Day 2021 today.

She said some of her trustee clients expressed concerns regarding their child’s inexperience in managing the SMSF in the event of the trustees losing capacity, which the new measure has resolved.

“The kids can be there sharing control of the super fund when the parents lose capacity. The kids will take over and do it entirely themselves or with an enduring power of attorney, and this gives the trustees an opportunity to soften the ‘big bang’,” she said.

She also noted having six members allowed the retention of large assets, as well as the inclusion of, and diversification into, other assets, which could be used to fund pensions and death benefits.

“If the fund has enough other members that are building up with contributions and rollovers buying other assets, by the time mum and dad die, the other assets will pay out their death benefits,” she said.

“I know a couple of cases with generations of families in the same business and they’re quite excited about the idea that having all six members in the fund will allow them to buy bigger assets. Six-member funds will also help them transition ownership of those assets over time.”

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