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Top 5 Mistakes To Avoid In SMSF Estate Planning?

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June 1, 2021

Superannuation Funds are a great source of investment for people if appropriately managed. It is essential to form an SMSF deed carefully to avoid having disputes between family about the same. Planning goes a long way when it comes to super funds. No matter the type of SMSF, planning what happens to the money in the event of a death is vital. It is crucial to avoid mistakes in estate planning. Fixing errors in the aftermath of the distribution is nearly impossible. Individuals may have family members reacting different or unfair if the death benefits of an SMSF is not pre-decided.

Thus, to maintain fairness, one has to set up the deed taking all considerations into view. Are you thinking of an SMSF property investment? Wait before you unknowingly cause yourself needless trouble. This blog brings you the top five mistakes one can avoid in SMSF estate planning to ensure the best results.

  • Inadequate planning – Declaring family members as trustees for your SMSF seems reasonable on the forefront, but disputes are inevitable in most cases. History has been proof of court cases that involved family disputes over SMSF estate planning. A family member nominated as a trustee may have a change of mind and cause issues. To cross out such conflicts, it is essential to carefully analyse them before deciding on nominees. Thus, inadequate planning can bring in potential disruptions and unfair decisions. It is recommended to consult an SMSF expert in case of doubts or confusions.
  • Faulty or incomplete documentation – Once decided and executed, a death benefit nomination stays binding. It becomes difficult for trustees to make changes as a binding nomination supersedes trustee judgement. A nomination has to be valid and well-planned to ensure hassle-free decisions later. It can be deemed invalid in a situation where trust deeds are not routinely upgraded. It is necessary to review it every five years to make sure that it is relevant and updated. The wording is the key in the deed, and so thorough brainstorming and cautious finalisation are fundamental to avoid faults or incomplete documentation.
  • Wrong nomination – A death benefit nomination can be binding and non-binding. If you choose a non-binding nomination, then the chosen trustee is not obliged to your conditions. In this case, you have no assurance that the money is spent as per your wishes. In case of a binding nomination, it is a guarantee that the selected trustee will honour your discretion. The biggest mistake of all could be nominating the wrong person as a trustee. Often, an error in judgement can lead to such a conclusion. In such a case, a nomination may be deemed invalid entirely or partially.
  • Misguided tax planning – Usually, there is no tax applicable on a death benefit. However, there are conditions applied. If an 18 year or older child who is financially independent is declared beneficiary, taxes are applicable. If the Legal Personal Representative and will help pay some of the death benefits to a non-dependent, taxes are mandatory.

The taxes payable on these exceptions are 15% plus the Medicare fee. Thus, to evade these compulsory taxes, it is advisable to plan accordingly. Proper financial planning can help cancel out inheritance conflicts within the family in the future. To receive complete assurance, consulting a financial or tax expert is a wise decision. For instance, if you are dealing with SMSF issues in Perth, consulting SMSF auditors Perth seems smart. A professional can help to effectively score out potential problems and aid in formulating a well-executed deed.

  • Unsettled divorce issue – Since potential beneficiaries are generally your spouse, financially dependent children or anyone financially dependent on you. It is necessary to evaluate and finalise your decision. In some instances, the death benefit goes to the deceased’s spouse, who already had a separation. If you haven’t finalised the divorce, the spouse can still claim all the benefits of your SMSF. Unless an ex-partner is not financially dependent on you, it would be better to get a divorce. This will officially tick them off the list of potential superannuation fund beneficiary.

Now that you are acquainted with standard errors that people make, it will stay registered in your mind. It is suggested to opt for a financial consultant when dealing with the SMSF death benefit documentation. An expert can help you out with complications and make the procedure effortless. These people are skilled and provide a streamlined data report of finances that comes in handy for later references. There are a lot of other mistakes that people tend to make when finalising a nominee selection.

In the presence of an expert, such decisions can become effortlessly easy. Since they are experienced, they can fill you in on instances in various circumstances. Having professional advice while deciding on a beneficiary can be helpful to overcome future discretion overrule and disputes.

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