Integrate the SMSF Into Your Estate Planning

Your superannuation entitlements can be a significant part of your overall wealth. It is often not appreciated that superannuation entitlements are not automatically controlled by your will.

In fact, the trustees of the superannuation fund are entitled to disregard your intentions unless they are set out in the required legal format.

SMSF and Wills

One of the most well-known examples of a will being disregarded by SMSF trustees was the case of Katz v Grossman in the New South Wales Supreme Court.

In that case, a man specified in his will that his superannuation entitlements should be split equally between his son and daughter. After his death, the daughter obtained control of the SMSF and paid all of the superannuation entitlements to herself.

While this is an extreme example, it highlights the risk of not providing a legally binding direction to the SMSF. It is now possible to make binding directions regarding superannuation entitlements, but additional considerations arise.

Two of the critical questions we can help you with is, who will control the SMSF after your death, and how should any binding directions be structured?

SMSF Payments to Dependants

Further issues arise because there are rules governing who can receive SMSF entitlements as a pension and who may only receive them as a lump sum.

There are also different taxation outcomes depending on who receives the benefit and the form in which it is paid.

These and other issues must be resolved as part of a broader estate planning strategy and ongoing management of your affairs.