Estate Planning and SMSFs

Estate Planning and SMSFs

Where an individual holds assets in their own name and through a SMSF then Estate Planning will need to be considered for both to ensure the individuals wishes are adhered to on death.

Although a SMSF member may have a Will in place, the assets owned in the SMSF do not form part of the Will and so if the member wishes to direct those assets to specific individuals on death, then the member will be required to complete a Binding Death Benefit Nomination (BDBN) form.

Where no BDBN form is completed then the trustee(s) of the SMSF will have the discretion as to who the deceased member’s benefits are paid too and if the benefits are paid to a non-death benefit dependent could trigger significant tax liabilities.

A SMSF death benefit can be paid out as a lump sum or a pension and how this is determined is based on a number of factors such as who the benefit was paid to, their age, and also the age of the deceased.

Another important consideration is whether a company or individual(s) should be appointed as trustee of the SMSF. If the individual member(s) act as trustee, then when that member/trustee passes away it could inadvertently trigger the SMSF to fail the SMSF definition test which could result in serious consequences.

To avoid this issue from happening, it is recommended a company be appointed as trustee, so on death of a member, the trustee will remain the same.

Please contact SMSF Live if you have any Estate Planning concerns.