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What Is The Role Of Estate-Planning In SMSF?

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May 21, 2021

Superannuation funds are a priceless asset for individuals. If planned correctly, the benefits can be immense. It is important to pre-decide nominees in case of your demise. This is a normal part of the process that has to be carefully executed to ascertain your discretion. Often, flaw some planning and implementation can cause huge complications. Issues such as a wrong nomination can cause rifts and disputes in the family. It is advised to opt for SMSF accountants if there are prevailing doubts or problems.

If you are inadequately informed about super funds or related matters, consulting an accountant is a wise decision. Are you curious about estate planning and SMSF? Want to know more? This blog provides a brief guide on the role of superannuation in estate planning.

What is Estate Planning?

Estate planning is the process of arranging your finances to be distributed among chosen beneficiaries in the event of your unfortunate death. It is careful management of granting assets to the heir/nominee and settling estate taxes. Generally, estate planning involves the guidance of a professional to minimise faults or errors in the final documentation. A proper estate plan aims to reduce taxes that a beneficiary may have to pay on obtaining the assets. Strategic planning and wise foresight are crucial to ensure the best.

Factors Vital to SMSF Estate Planning

It is not enough to write down a will when it comes to ensuring actions as per your wishes. There are other important factors as well that can guarantee successful SMSF estate planning. These are:

  • Limitations of a Will – A will is the first step to set up an estate plan. However, to acquire benefits through SMSFs, you need a binding death benefit nomination document. This ensures that your intentions are dealt with appropriately. You cannot rely on a will for the distribution of your super fund. A superfund works at the discretion of a trustee. A trustee decides the nominee who gets the death benefits through a superannuation fund. Thus, it is important to stay informed about SMSFs to plan better.
  • Taxes on death benefit – Although both tax and non-tax dependents can acquire an SMSF death benefit. The potential nominees of a death benefit are usually anyone financially dependent on the deceased. Choosing others as a nominee can account for applicable taxes. The payable taxes include a 15% tax rate plus the Medicare levy. It is essential to be aware of who is dependent under the concerned law. Being updated with such details help to formulate a better deed. If you decide to opt for an accountant providing SMSF services, ensure they are licensed. An experienced professional can help you figure out tactics and ways to establish a well-executed trust deed.
  • Nominee selection – It is imperative to make the right decision when selecting nominees. A lot of people declare a family member as a nominee without much thought. This has cause inheritance conflicts in a lot of families. The classic case of Katz v/s Grossman is a significant example as to why proper planning is essential. It is also necessary to review and update from time to time. This ensures that the chosen nominees are still relevant to the current date.
  • Formulating a trust deed – An accurate trust deed is the most vital factor of all. To stay valid, the deed needs periodic revisions to stay relevant to the updated legislation changes. It is essential to frame a trust deed that is accurate since making amends, or changes can get nearly impossible. A trust deed is generally irreversible except when the terms of the deed allow for a change. To cancel out hassles, it is in your best interests to talk to a relevant professional. Skilled and efficient, a certified accountant can aid in a proper deed creation that is free of errors.
  • Binding documentation – A death benefit nomination can be binding or non-binding. In the event of a non-binding agreement, there is no assurance that your wishes may be carried out according to the deed. So, to avoid unnecessary issues, it is best to form a binding document. A binding deed ensures that your control over the superannuation fund is retained.
  • Setting reversionary pensions – A reversionary pension allows the chosen beneficiary the entitlement to your superannuation pension. This is a way to maintain the validity of your discretion and may help to avoid potential disputes. This also helps to set up a consistent income flow for multiple beneficiaries.

Now that you are familiar with the various factors crucial to validate your SMSF death benefit nomination, selection becomes effortless. If you are planning on a property purchase, refer to self managed super property rules for best results. Discussing such decisions with a trusted accountant can help you avoid basic SMSF mistakes to avail a positive outcome.

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