When you hear about estate planning, the things that come to mind are writing a will, choosing witnesses, designating beneficiaries, and figuring out how to transfer assets such as property and cash. Now, if you operate an SMSF, which is a Self-Managed Super Fund, there is an additional layer you need to take into account.
Your SMSF does not wait until retirement – it is an integral part of your financial legacy. Deciding how your SMSF will feature as part of your estate can ultimately safeguard the interests of your nearest and dearest ones who will receive it and give you the peace of mind that your exact wishes will be carried out.
This blog discusses how to include SMSF in estate plan decisions in a clear, dynamic and simple manner rather than the hypothetical legal textbook scenario.
Why Your SMSF Should Be Part of Your Estate Plan
Now let’s be honest. For many, many years, most of us build up a super balance when it comes to money, but we never even think about how this is going to be handled after our death. This is where SMSF estate planning comes into the picture. SMSFs are privately owned, unlike run-of-the-mill superannuation accounts owned by large institutions, which means they have a high level of control and the responsibility that comes with that.
Things just do not “automatically” transfer to the family when someone with an SMSF dies. It involves rules, documents, nominations, and decisions that need to be dealt with properly, or the whole thing can get complicated (and costly).
And that is why wise estate planning with SMSF is not merely a good choice – it is imperative. It is about ensuring the right people get the right amount of your inheritance, at the right time, and in the most tax-effective manner.
Step 1: Understand the Importance of Nominations
One of the first things to get right is your SMSF binding death benefit nomination. This is a legal document that tells the fund’s trustee who should receive your super when you’re gone.
Without a valid binding nomination, the trustee has discretion over who gets your SMSF balance, and that may not line up with your wishes. With a binding nomination, your intentions are locked in, making things clear and simple for your family.
Just make sure you review your nomination every three years – it can expire if ignored.
Step 2: Decide Who Takes Over the Fund
What happens to your SMSF after you die? That’s where SMSF succession planning comes in.
- If you were the only trustee, who would step into your shoes?
- If you were one among many, does your family still have control?
Setting this up means planning who will manage the fund when you’re no longer around. This might involve appointing a legal personal representative or adding your spouse or adult child as a trustee before death.
Don’t underestimate the SMSF trustee role after death – they hold the power to administer benefits, manage assets, and deal with the ATO. Make sure your successor is someone you trust and who understands the responsibilities involved.
Step 3: Think About the Tax Impact
One thing many people forget in SMSF estate planning is tax. Just because you’ve built up a strong balance doesn’t mean it all goes to your family tax-free. In fact, SMSF taxation on death can get tricky.
For example, if your super is paid to a non-dependent (like an adult child), they might have to pay tax on the taxable portion of the benefit. If it goes to a spouse or someone financially dependent on you, it may be tax-free.
Working with smsf accountants or estate planners can help you figure out the most tax-smart way to structure things.
Step 4: Insurance Through Your SMSF – Yes or No?
Including life insurance inside your SMSF can be part of your broader plan. Premiums are paid from your fund, which can be tax-deductible – this is one of the often-overlooked SMSF estate planning advantages.
The SMSF owns the policy, and the member is the person insured. That way, when something happens, the payout stays within the fund and can be distributed to your nominated beneficiaries in the form of an SMSF death benefit.
It’s important to regularly review your insurance needs as your life stage changes – especially if you’re approaching retirement. For many, SMSF planning for retirees includes adjusting cover to ensure the fund can support a spouse or dependent even after death.
Step 5: Understand the Rules for Beneficiaries
When setting up your estate plan, it’s crucial to be clear on SMSF beneficiary rules. Not just anyone can receive your super. The law only allows it for dependents – like a spouse, children under 18, or someone financially dependent on you – or to your estate.
If you want your adult child or someone else to inherit, it may need to go through your will, which means probate and potential delays.
This is why you need clear documentation and the help of expert estate planners in Perth or your local region – professionals who know how super and estate law interact.
Step 6: Create a Super-Specific Estate Strategy
A generic will isn’t enough when you have an SMSF. You need to create estate planning strategies for SMSF that account for everything from your fund structure to your asset types and family dynamics.
This might include:
- Tailoring your trust deed to support your estate goals
- Ensuring the death benefit nomination aligns with your will
- Splitting pensions between family members
- Making sure insurance payouts are structured tax-effectively
Proper planning ensures your loved ones avoid unnecessary stress, costs, or disputes down the line.
Step 7: Bring in the Professionals
When it comes to superannuation estate planning, DIY is rarely the smartest approach. SMSFs involve a web of tax laws, trustee obligations, and compliance rules that most people simply don’t have time to master.
That’s where professionals come in. Estate planners, SMSF accountants, and legal experts can help ensure everything from your trust deed to your binding nominations sync.
If you’re in WA, reaching out to expert estate planners in Perth or a tax accountant who specialises in SMSFs is a smart first move. These pros know the local regulations and can tailor strategies that suit your situation.
A Note on Family Estate Planning
It’s not just about your super or your will – it’s about your whole picture. Family estate planning ties it all together by looking at how every asset, from real estate to super, fits into your legacy.
Whether it’s ensuring your spouse has access to funds, protecting an adult child’s inheritance from divorce, or avoiding a court battle between relatives – estate planning with SMSF ensures your family is supported and protected.
Whether you’re just starting out or reviewing your plan later in life, revisit it regularly with your financial adviser, SMSF accountants, or legal expert. Small changes now can make a big difference later.
Conclusion
You’ve worked hard to build your super. Now make sure it continues to work for your family, even after you’re gone. Including your SMSF in your estate plan isn’t just a box to tick – it’s a powerful way to make your financial legacy meaningful, fair, and efficient.
From tax savings and faster access to funds, to peace of mind knowing your loved ones are protected, SMSF estate planning puts you in control.