Estate Planning

Address death benefits at fund set up

death benefits establishment

The best time to address the payment of death benefits for SMSF members is at the time of the fund’s creation.

SMSF advisers should factor the payment of death benefits into discussions related to the establishment of a new fund, even where the fund has a low balance, to prevent the issue being overlooked, according to a technical specialist.

SuperGuardian education manager Tim Miller said addressing death with trustees can be a struggle for some advisers, but it was better to address it upfront before any money was placed into a fund.

“Many years ago I struggled with the concept of talking about death benefits with SMSF trustees, but it is one of those areas where you just need to approach it from the reality that everybody is going to pass away,” Miller said during a recent webinar.

“We don’t know when that’s going to occur in most circumstances so we have to start planning right from the very outset.

“Part of an SMSF establishment checklist is to address some of those key issues right away because we can get carried away or caught up in the setting-up process, and establishing the estate planning part is critical because once that first money is in the account there is capacity to pay a death benefit.”

Miller urged SMSF advisers to review their own arrangements as well and make any changes required in keeping with the advice they provide to clients.

He pointed out he was yet to change his death benefit nomination from his own SMSF following a change in personal circumstances, which highlighted existing plans may be ineffective or undesirable in the future.

“A key issue from an SMSF planning point of view is if there is a relationship breakdown, what action are you taking to ensure that death benefits are going to the right place?” he said.

“I suspect, like myself, you always focus on everybody else’s scenario before you address your own, so when we are looking at these matters from our clients’ point of view, are we also looking at it from our own point of view as well?”

In the same webinar, he also recommended fund members tie their membership to the payment of a death benefit thus allowing a third party to act for them even after their passing.

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