Estate Planning, Property

Limited consideration of property at death

SMSF property death benefit

Non-specialist SMSF advisers are not considering how to treat property as a death benefit.

The inclusion of property in an SMSF’s portfolio without consideration of how it may form part of a member’s death benefit is becoming a common problem among unadvised trustees, according to an SMSF legal expert.

Griffiths Law principal Owen Griffiths said the lack of planning around the treatment of property within an SMSF at the time of death was a frequent point of discussion, particularly where clients had a fund set up by an accountant who was unable to provide full advice.

“Holding property in super with no advice at all from anyone, whether it be the risks involved or regarding one of the members dying and holding a property which forms part of the balance from which a death benefit is paid, is the biggest amount of SMSF work at present,” Griffiths told selfmanagedsuper.

“For me, accountants do not appear to be putting any thought or time into what is a death benefit and how death benefit nominations should be structured.”

He said there were no simple solutions for unwinding poorly created death benefit nominations in regard to property and he was having to provide clients with the options available.

“When I talk to a client, I structure it in a way which gives the beneficiaries the options of paying it out as a pension, lump sum, or in specie or a combination of all three,” he said.

“However, with in specie transfers, some accountants don’t understand this can be a solution because often a family will have that property in a farm or business and not want to lose control of that property.

“If the property has to get paid out as a death benefit via an in specie transfer, I don’t think accountants have much experience in that area and that can be quite telling. It’s important the client’s accountant is on board with that.

“Regular reviews by the accountant as to the change in the superannuation laws is important and I often see them doing updates every three or four years.

“It is cheap for the clients, but getting them on board is the real challenge because they often have the blinkers on and quite focused on tasks rather than taking a step back and looking at what the actual SMSF deed says and making sure it is compliant with legislation as it changes over the years.”

Copyright © SMS Magazine 2024

ABN 43 564 725 109

Benchmark Media

Site design Red Cloud Digital