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:
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.
‘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.
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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It’s important to have the knowledge you need to make an informed and confident decision about your retirement savings.