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Estate Planning
An important aspect of superannuation planning is ensuring death benefits are paid according to the wishes of the member. If the member has not made a binding nomination, the trustees of a superannuation fund are directly involved in deciding how a death benefit should be distributed.

A self managed superannuation fund (SMSF) gives the power of making this decision to the surviving trustees of the fund, helping ensure the wishes of the deceased member are carried out. In a public offer fund, the trustees’ decision may also be challenged by a potential beneficiary (such as another family member or financial dependant) in the Superannuation Complaints Tribunal, a scenario not currently possible under an SMSF.

How it works
John age 61 and his wife Jocelyn, 62, are trustees and members of their own self managed superannuation fund (SMSF). The value of the fund is $600,000 and comprises a number of wholesale managed funds.

Unfortunately John dies leaving Jocelyn as the sole member. Previously they had both made wills stating that their assets should pass to each other on death, and on the death of the surviving spouse, to their children.

Jocelyn, as a trustee of the SMSF, can decide how John’s death benefit is to be distributed and is able to carry out John’s wishes regarding the payment.

If John and Jocelyn did not have an SMSF and belonged to a public offer super fund, the trustee of the public offer fund would decide how the death benefit will be paid. There is a risk that the trustee may not pay the whole death benefit to Jocelyn as John had intended. While John could have made a binding death benefit nomination in favour of Jocelyn, these become invalid if not updated every three years.

An SMSF with individual trustees, and not a company as trustee, must normally have at least two trustees. Jocelyn may make the decision about the death benefit within six months of John’s death otherwise she will need to invite someone to act as trustee with her, which could be a trusted family member or friend. The decision regarding the payment of the death benefit will then be made in conjunction with the other trustee.


Disclaimer: The information contained in this document is given in good faith and has been prepared from information believed to be accurate and reliable. This information is of general nature only and based on Multiport’s interpretation of the present laws but no guarantee is provided. This document is not designed to be a substitute for financial or investment advice and should not be relied upon as such. Reproduction of material in this document is only permitted with approval of the author.
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