Why a corporate trustee for your SMSF makes sense

Future planning your self managed super fund (SMSF) is a complex process. It is further complicated by the rule requiring at least two individuals (but no more than four) to act as trustees of any SMSF.
Although many couples organise their retirement planning together and meet the two person rule, they may not consider the implications to the fund when one of them passes away, or if they do, they default to appointing an adult child as co-trustee. Whilst familial connection is often perceived as the best way to provide support and meet legal requirements, it can create a number of issues, notably:

  1. The paper trail
    Changing trustees means a mountain of administration and paperwork—generally the last thing trustees want, especially those offspring that are busy enough managing their own lives.  If you are thinking about taking on the role of trustee then please consider the SMSF reporting and tax documents you will be required to co-sign. Logistics alone can make this a major headaches.
  2. ‘Un’ happy families
    Legally up to three adult children can be added as trustees alongside the surviving parent, but logistically it makes sense to add only one given the aforementioned paper trail. But by selecting only one, there is the potential for tension amongst siblings.  The chosen child must also consider the ramifications and emotional burden if an investment fails or if there are compliance issues on their watch. And even if they are investment savvy, does their attitude to risk align with that of their parents?

The smart solution

Although establishing a corporate trustee may sound complicated, in reality it’s a neat structure for SMSF succession planning. Where it really makes its mark is that it can be run by a single member (with the flexibility to accommodate up to four in total) making the transition to one surviving spouse an easier process.

It is worth noting that as a company structure, corporate trustees are subject to additional legal and ASIC fees. Any changes involve fees and considerable paperwork so establishing the corporate trustee structure whilst both partners are alive makes sense.

For those really wanting to keep it in the family, remember that under the corporate trustee model, adult children don't need to be appointed as trustee but can simply provide support in an informal capacity. And sometimes that can make all the difference.

This insight may contain general financial advice and was prepared without taking into account your objectives, financial situation or needs. Before acting on any advice, you should consider whether the advice is appropriate to you. Seeking professional personal advice is always highly recommended. Any forward looking statements are based on current expectations at the time of writing. No assurance can be given that such expectations will prove to be correct.

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Whether you’ve had the same super fund or investment structure in place for some time, your personal circumstances and balance may have changed – which is why it makes sense to review your arrangements. But where do you start? By using our simple guide, we show you five key areas you should consider when comparing options, which can help make it easier to make a more informed choice about your super and determine the most appropriate solution for you.

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Nerida Cole

Managing Director, Head of Advice

Nerida is a highly experienced financial adviser with a specialisation in all aspects of superannuation including self managed super funds (SMSF), retirement planning and wealth-building strategies. Nerida is responsible for the training, development and mentoring of all of Dixon Advisory’s team of Financial Advisers Australia wide.

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