Estate Planning

Separate SMSFs useful to address distortion

separate SMSFs

Separate SMSFs can be a useful estate planning tool where the financial relationships between parties have been distorted over time.

Separate SMSFs can be a useful estate planning tool for blended families, but can also deal with complex estate planning matters between spouses in their first marriage and their adult children, an SMSF legal expert has claimed.

Cooper Grace Ward partner Scott Hay-Bartlem said separate SMSFs were useful for estate planning where parties may have inequitable finances. Separate SMSFs refer to ones where a sole member was also the director of the trustee company and sole decision-maker. The member can decide what happens to their fund after death.

“A blended family is a prime example of where you might want to use separate SMSFs. But a married couple might want to consider it as well under some circumstances,” Hay-Bartlem said during a briefing in Sydney today.

“I am getting clients where there has been an inheritance from a parent. It distorts their money relationship. That can make a difference if there have been issues between them along the way.”

Hay-Bartlem said separate SMSFs could create different payments. For instance, there could be different payments on the death of a parent where one child may have been more involved in business interests held by the family than their siblings.

He referenced the case of a couple with three adult children and a business in which only one of the children worked. In this scenario, their SMSF owned the business premises.

“These types of scenarios are not that uncommon. We are going to see some equity issues. That might be one instance where we talk about a range of things. This includes putting some money aside to a different SMSF,” he said.

“If there are two children not working in the business and one is working in the business, and the SMSF owns the business premises, you can see the potential for tension.

“That might be a reason why you start dividing things up between different funds to pass them to different children. For blended families, separate funds are perfect. However, they can still be important in other family situations.”

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