Liam Shorte

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All posts in category Estate Planning

Class SMSF Benchmark Report Shows SMSF Investors Using the Newer Platforms

In it latest quarterly review of the SMSF sector Class have indicated that Platform use is actually rising a little among SMSF Trustees from 55% to 58%. However there is some change in the guard in terms of which platforms are seeing inflows. From the media release on the report:

Investment platforms have maintained their share of self-managed super funds in the past two years but the market share of the providers has shifted in favour of the non-aligned in the latest Class SMSF Benchmark Report.

The September quarter Report, based on an analysis of 120,000 SMSFs, shows that slightly less than 1 in 5 SMSFs use platforms and this has remained relatively stable for the past two years. However, the proportion of assets these funds hold on the platform has actually increased since 2014, from 55% to 58%, suggesting that predictions of the imminent demise of platforms in the SMSF market are premature.
However, the market share of different platform types has shifted significantly over the same period.

While all platforms increased the value of SMSF assets they held, most institutional platform providers lost ground compared to their non-aligned peers, especially Praemium, HUB24 and netwealth. The notable exception among the institutions was BT, which was able to build on its leading position and grow from 41% to 46% of all platform assets. Excluding BT, institutional platforms saw their share of platform assets drop from 47% to 40%.

I don’t find this a surprise as BT has launched its new generation BT Panorama platform which works especially well for SMSF investors. You can access Cash, very competitive Term Deposits from BT, Westpac and St George as well as shares, hybrids, ETFs, managed funds and managed accounts all on the one reporting platform as well as include external assets in the report. We have started using this platform for new clients as it is keenly priced with no administration charge for cash or term deposits and competitive admin fees for shares and managed funds.

Platform users more likely to use Managed Funds

Again the report also shows a higher use of managed funds by those using Platforms which no doubt is due somewhat to the preference for platforms by many SMSF advisers and also that many trustees use platforms to access sectors or managers they can’t get direct/retail. Again from the report:

The Report also found that SMSFs that use a platform allocate their assets differently to those that don’t. SMSFs that use platforms hold less cash and direct property but almost three times the percentage of managed funds as other SMSFs.

While the two categories of SMSFs have a similar direct exposure to shares, those that use platforms appear to be increasingly holding their equities off the platform, such as through a broker.

You can access the full Class Benchmark report and previous release here

I found the table of the Top 20 investment holdings in each class very insightful as it shows the increase in use of ETFs in SMSF portfolios. Hear is a summary of the top 5 ETFs from the data:

1 IVV   Ishares S&P 500 ETF – Chess Depositary Interests 1:1 IshS&P500
2 IOO Ishares Global 100 ETF – Chess Depositary Interests 1:1 Ishglb100
3 STW SPDR S&P/ASX 200 Fund – Exchange Traded Fund Units Fully Paid
4   VTS   Vanguard Us Total Market Shares Index ETF – Chess Depositary Interests 1:1
5   VEU Vanguard All-World Ex-Us Shares Index ETF – Chess Depositary Interests 1:1

Likewise the top 5 Managed funds

1 PLA0002AU   Platinum International Fund
2   MGE0001AU Magellan Global Fund
3   PLA0004AU   Platinum Asia Fund
4   FID0008AU   Fidelity Australian Equities Fund
5   MAQ0482AU Winton Global Alpha Fund

I hope this guidance has been helpful and please take the time to comment. Feedback always appreciated. Please reblog, retweet, like on Facebook etc to make sure we get the news out there. As always please contact me if you want to look at your own options. We have offices in Castle Hill and Windsor but can meet clients anywhere in Sydney or via Skype. Just click the Schedule Now button up on the left to find the appointment options.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

1 Comment

by SMSF Coach - Liam Shorte on November 22, 2016 • Permalink

Posted in Enduring Power of Attorney, Estate Planning, SMSF Management, Trustee

Posted by SMSF Coach - Liam Shorte on November 22, 2016

https://smsfcoach.com.au/2016/11/22/class-smsf-benchmark-report-shows-smsf-investors-using-the-newer-platforms/

How to Use Insurance to Pay Out an SMSF Property Mortgage on Death or Disability

Like every strategy we discuss with clients we stress that have to look at the exit strategies up front rather than scramble to react if something happens that changes the financial position of the members or of the fund.

While a self managed superannuation fund can increase its assets and leverage the potential growth by borrowing to purchase a property, that borrowing can also cause financial distress if a fund member dies or becomes disabled. The lack of liquidity and cash flow could force the trustee to:

Sell the property in a difficult or dropping market
Realise capital gains or losses before expected i.e. before the members are in pension phase
Have to deal with increased transaction costs.

Since August 2012 Trustees of an SMSF have been required to consider insurance for members and we would say that is very sensible when debt is involved.

SUPERANNUATION INDUSTRY (SUPERVISION) REGULATIONS 1994 – REG 4.09 (2)(e)

The trustee of the entity must formulate, review regularly and give effect to an investment strategy that has regard to the whole of the circumstances of the entity including, but not limited to, the following:

for a self managed superannuation fund – whether the trustees of the fund should hold a contract of insurance that provides insurance cover for one or more members of the fund

In the past strategies like Cross insurance on each member of superannuation fund was often used to reduce the impact that the sudden death or disability of a member may have on a fund however the ATO have ruled out many of these strategies including using the SMSF to fund Buy-Sell Agreements between business partners.

SMSF mortgage repayment solutions on death

If there is life insurance on the member that dies then any proceeds are added to their account balance and can be paid as a lump sum out of the fund to beneficiaries but that may leave a fund a debt still to be paid off and with less contributions going in as one member is deceased and the fund may not have the free cash-flow to fund the full balance pay out without selling the property.

The strategies outlined below are those now available as to manage the cash-flow liquidity issues and death benefit payment requirements that have arisen when a fund member dies suddenly, whilst the fund still has a Limited Recourse Loan Arrangement in place.

Payment of insurance benefits as an income stream to spouse

If it is 2 spouses or defacto’s that have set up an SMSF and borrowed to purchase an investment property, life insurance is often used to extinguish the debt. The reason for this is that generally the disability or death will eliminate or reduce the level of contributions that are made for the member, from which the loan repayments have been sourced.

Where the members of a fund are spouses then death benefits can be paid as an income stream. This means that even if a fund has borrowed to purchase a property, the property does not need to be disposed of to pay out the death benefit. This is even more important if your business is run out of the property.

In this case the life/TPD cover can be held by the member covered by the insurance and the premium can be paid from that members account. These arrangements comply with the SIS Regs, and the policy can be held through the self managed fund.

If the member dies or becomes disabled, the proceeds will be credited to the affected member’s account and loan will be repaid. Following the repayment of the loan a pension will commence to be paid to the member in the event of TPD or to the spouse in the event of death. If under 65 they can take as little as 4% per annum to keep as much in the fund as possible.

Example: Tax Dependants like spouses

Jack and Diane are married and members of Mellencamp Family Super Fund (“SMSF”)
Account Balances:
Jack – $100,000
Diane – $100,000
SMSF took out a loan of $300,000 to acquire property valued at $500,000

example-1-tax-dependants

Jack dies after getting a bad knock playing football ( for the younger readers get the full story here

anyway thank you for indulging me and now back to the example:

SMSF Cash flow after Jack’s death

The loan is paid out.
Diane starts a minimum 4% annual death benefit pension. Only one member left contributing now but no interest to pay.

Rent	$17,500
Concessional contributions	$5,000
Total inflows	$22,500
Interest	$0
Operating costs	($2,000)
Life premiums	$0
Pension	($16,000)
Total outflows	($18,000)
Tax	($675)
Net cash flow (surplus)	$3,825

what are the tax implications of the pension

Age at Death	Type of Super Death Benefit	Age of Recipient- DEPENDANT	Taxation Treatment of Taxed Element
Any age	Lump Sum	Any age	Tax free
60 & above	Income stream	Any age	Tax free
Below 60	Income stream	60 & above	Tax free
Below 60	Income stream	Below 60	Marginal rate of tax less 15% tax offset

To implement the strategy, the following factors, need to be considered:

The funds trust deed must permit the fund to hold the insurance and to pay the TPD or death benefits as an income stream
The fund’s investment strategy should state that the trustees have considered the needs of the individual members and determined to take out life insurance for the fund members in order to repay any outstanding mortgage under an LRBA
Whether the fund’s cash flow allows for the taking out of the insurance policies. The premiums will normally be deductible in this circumstance as the benefits can be paid as a pension. For younger trustees you should consider Level Premiums and reviewing the cover as the loan is paid down.

Funding benefits from a reserve

If a fund is not able to pay a death or disability benefit in the form of a pension because they don’t have a spouse or the fund trust deed does not permit the payment of a benefit as a pension, then it may need to consider the use of a reserve strategy.

This strategy involves the fund trustee taking sufficient TPD and death cover over the lives of the fund members to enable the repayment of a loan and the payment of benefits as a lump sum.

The fact that the insurance policies are paid from the fund’s reserve and the insurance proceeds in the event of an insured event are credited to the reserve, means that the insurance benefit can remain in the fund. The fact that the insurance proceeds can remain in the fund means that insurance liabilities can be met and the loan repaid without the asset purchased under the borrowing arrangement needing to be sold.

In order to implement the strategy effectively, insurance policies premiums for each of the fund members will need to be paid from the reserve. The fact that the premium is paid from the reserve will then require any insurance proceeds after an insured event to be credited to the reserve.

Example 2 – Non- Tax Dependants – 2 brothers in a business

example-2-non-tax-dependants

So sadly Brad dies …big ahhhh!

SMSF Cash flow after Brad’s death

Death benefits are held in a Reserve.
The loan is paid out but the value is held in the reserve account
Results in large reserve ($400,000)
allocate back to Brian < 5% of his balance p.a. or
allocate up to $25,000 p.a. this year and $25,000pa going forward to Brian’s account depending on other concessional contributions in year

Rent	$17,500
Concessional contributions	$10,000
Total inflows	$27,500
Interest	($18,000)
Operating costs	($2,000)
Life premiums	($1,500)*
Pension	$0
Total outflows	($21,500)
Tax	($900)
Net cash flow (surplus)	$5,100

* Deducted from general fund expenses

Other Issues to consider

There are a number of other issues that fund trustees will need to consider when implementing this strategy:

If the members of the fund are business partners rather than spouses, the spouse of the deceased member may feel that the business partners are benefiting from the death of their spouse. It is really important to discuss these strategies upfront with family so they know they are provided for but that the business needs stability too.
When the insurance proceeds are credited to a reserve, it may be difficult to transfer that reserve back to fund members without exceeding the excessive concessional contributions cap.
The insurance premiums are not tax-deductible under Section 295-465 of the ITAA 97 because the policy is not held for the purpose of providing a fund member with a death or disability benefit.
The cost of the insurance premiums could be very high so seek advice on all possible solutions.
The cost of the insurance premiums may limit the trustee’s capacity to take out other insurance cover for members

By the Way – one other reason to cover your exit strategies

What happens if a trustee fails to address insurance in their SMSF?

The trustees could be fined 100 penalty units ($21,000) for each trustee – Section 34 SIS Act; Section 4AA Crimes Act 1911

and if someone else has been affected by the loss as a result:

A person who suffers loss or damage …may recover … against that other person or against any person involved in the contravention. – Section 55(3) SIS Act

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

Image courtesy of Vichaya Kiatying-Angsulee at FreeDigitalPhotos.net

1 Comment

by SMSF Coach - Liam Shorte on November 17, 2016 • Permalink

Posted in Estate Planning, Insurance Strategies, Life Insurance, LRBA, Property, SMSF Exit Strategies, SMSF Management

Posted by SMSF Coach - Liam Shorte on November 17, 2016

https://smsfcoach.com.au/2016/11/17/how-to-use-insurance-to-pay-out-an-smsf-property-mortgage-on-death-or-disability/

Court Defends Superannuation Death Benefits from Bankruptcy

I keep hammering it in to my small business clients that while they may be passionate about their business and absolutely certain it will succeed, that they need to have a Plan B. Things can and do go wrong no matter how hard you work.

Superannuation is that Plan B in many cases. By putting away a portion of your profits each year to super you can minimise your tax obligations, save for retirement and protect some of your hard-earned wealth from unforeseen circumstances like a business collapse.

I always give an example of the client who had a very successful software business that was making decent money every year who listened to me and put funds away in superannuation yearly despite not wholly trusting the system. 6 years ago a dodgy overseas firm copied and made minor changes to his software and sold it for 10% of his price, thereby decimating his profits. He could lose everything as the ensuing defence of his patents in court cases is wiping out his personal and the company’s finances. Even if he wins, they could just keep their assets overseas and he has no chance of recovering costs and damages. The one thing protected is his Superannuation which will provide a decent if not a bit less comfortable retirement than expected.

A recent case shows the benefit of having superannuation funds when all else fails to protect you and your loved ones. In the case of Trustees of the Property of Morris (Bankrupt) v Morris (Bankrupt) [2016] FCA 846 shows just what happens when superannuation, bankruptcy and the payment of death benefits intersect.

Background
Ms Morris became bankrupt 3-4 months after her husband, Mr Foreman, died. Mr Foreman held two policies with two different superannuation funds: AustSafe Super and Plum Super.

After becoming bankrupt, Ms Morris received three separate payments. Plum Super made a life insurance payment of $311,865.95 to Mrs Foreman, which is not controversial as section 116(2)(d)(ii) of the Act provides that divisible property does not extend to life assurance policy proceeds of a bankrupt—or their spouse—received on or after the date of bankruptcy. SAFE

What was ‘controversial’ was AustSafe Super’s payment of $45,392.48 and Plum Super’s payment of $67,240.27. Those funds made these payments to the bankrupt under discretionary powers, as Mr Foreman had not nominated any dependents or beneficiaries.

Mrs Morris’s bankruptcy trustees applied to court in respect of these payments arguing that the superannuation monies received by the bankrupt were after-acquired property that vested in them (as bankruptcy trustees) and was therefore divisible among the bankrupt estate’s creditors. Uh Oh trouble!

I am not lawyer so I will not go in to details of the argument but I am happy point you to a good lawyer for the detail of the argument and some interpretation of the decision in a good blog by Bryce Figot of DBA Lawyers – See more at here and the actual case decision here

In summary

Justice Logan held that prior to the superannuation fund trustees’ exercising their discretion in favour of Ms Morris, she had no interest in either fund; however, upon this favourable decision, an interest was then created in the superannuation funds, and therefore these payments (totalling $112,632.75) made to Ms Morris (after bankruptcy) were held to be captured by s116(2)(d)(iii) and s116(2)(d)(iv) of the Act. Consequently, the bankruptcy trustees were unsuccessful with their application.

So superannuation death benefits received by the bankrupt were protected from Bankruptcy Trustees

I have not seen any previous guidance or authorities about the meaning and effect of the above sections of the Act, however the decision seems to be consistent with the intention of legislation to protect and preserve benefits in respect of retirement for both members of funds as well as their spouses and dependents.

If you or your spouse are in business or a highly litigious profession or high risk investors that could lose all if investments go wrong then come and talk to us about Your Plan B

I hope this guidance has been helpful and please comment. Feedback always appreciated. Please reblog, retweet, like on Facebook etc to make sure we get the news out there. As always please contact me if you want to look at your own options. We have offices in Castle Hill and Windsor but can meet clients anywhere in Sydney or via Skype. Just click the Schedule Now button up on the left to find the appointment options.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

Leave a comment

by SMSF Coach - Liam Shorte on October 5, 2016 • Permalink

Posted in Bankruptcy Protection, Estate Planning

Posted by SMSF Coach - Liam Shorte on October 5, 2016

https://smsfcoach.com.au/2016/10/05/court-defends-superannuation-death-benefits-from-bankruptcy/

Small APRA Fund as an Exit Strategy for SMSF Trustees

On the home page of this blog I outline the Benefits of a Self Managed Super Fund – SMSF in some detail. Well, when looking at any investment structure I always like to assess the alternative options and eventual exit strategies. While many of you will know of the Retail and Industry superannuation fund options, you may not be as familiar with a close relation to the SMSF known as a Small APRA fund (SAF). So let’s look at little closer at this option.

What is an Small APRA Fund (SAF)?

An SAF is similar to an SMSF but instead of the client(s) being the trustee(s), a professional licensed trustee is responsible for all of the administrative, compliance and legislative responsibilities of running the superannuation fund.

SAFs offer an alternative for clients looking for the increased flexibility of an SMSF but without the burden of being a trustee and the associated compliance risk. They are also an effective solution for clients who are non-residents or bankrupt and therefore unable to be trustees of an SMSF.

I always warn new clients that if your career or business relies on you being a director then you must take the decision to set up an SMSF very carefully and be ready to put the time and effort in or choose SMSF specialist advisors to ensure your fund remains compliant so that you don’t lose your ability to be a director of any company because of breaching SMSF legislation.

SAFs provide all of the legislative advantages afforded to SMSFs, without the risks associated with breaching legislative compliance requirements.

Let be very honest up front and say this is not a suitable option for small balances as you are incurring an extra layer of trustee fees. However for those with larger balances the option can be very cost-effective especially when you consider the ability to relieve yourself of the trustee responsibilities.

Main benefits of the SAF structure

1. Offloading the Compliance risk

The main advantage of running an SAF is that the compliance risk is borne by the professional licensed trustee whose core responsibility is the provision of trustee services. If an SAF is in breach of the rules, the members of the fund will not be liable for the compliance mistakes of the professional trustee. In an SMSF, all members must be a trustee or director of a corporate trustee which means all members bear the compliance liability. You cannot claim your spouse was solely responsible for running the fund. One case clearly shows the risk of being a “silent trustee”where the verdict found the former wife, in her role as a trustee of the fund, was personally liable when it became non-complying after her former husband stripped out most of the assets and headed overseas. See Shail Superannuation Fund and Commissioner of Tax [2011] AATA 940

2. Administration of the fund

A professional licensed trustee in charge of an SAF typically appoints professional organisations to carry out the administration of the fund or is skilled and experienced enough to avoid common breaches of legislative requirements. As the professional licensed trustee administers all information and transactions, record keeping is typically timely and accurate. In SMSFs, the trustees are typically responsible for collating all the documentation and reports so their chosen administration service can prepare the financials of their fund (Not so hard as it sounds nowadays but when your busy?…paperwork suffers)

3. Travelling overseas for extended periods

SAFs are more flexible for people who may go overseas for an indefinite period compared to SMSFs which are strictly regulated in that circumstance. Members of an SMSF who relocate for an extended period of time have to fulfil two requirements – the central management and control of an SMSF needs to be in Australia, and the active member test needs to be fulfilled . If any of these requirements are breached, the SMSF loses its residency status, is deemed non-compliant and will face exorbitant penalty taxes of up to 46.5%. An SAF however can have offshore members – as long as they are Australian residents for tax purposes.

4. Protection and access to Superannuation Complaints Tribunal

In the case of fraudulent conduct or theft, SAFs have more readily available redress options including a grant of financial assistance as statutory compensation and access to the Superannuation Complaints Tribunal which deals with complaints about the decisions and conduct of APRA-regulated fund trustees and other decision makers. Conversely, no compensation scheme exists for SMSFs and they instead have to rely on courts to resolve disputes or look to the Corporations Law to take action against a financial adviser, accountant or administrator for losses they believe are due to misconduct, negligence or inappropriate action.

5. Disqualified persons – Bankruptcy or Criminal record

Individuals are not allowed to be trustees of an SMSF or directors of a corporate trustee if they have committed a crime involving dishonesty such as fraud, theft or embezzlement or if they have been declared bankrupt. The Tax Office will ban individuals from taking on positions of responsibility in an SMSF if it believes the person has breached the superannuation laws either very seriously or persistently or it believes the person is not a fit or proper person and hence should be disqualified. There are no issues with a disqualified person becoming a member of an SAF as they are not required to fill the role of trustee and it is in fact an often preferred solution for those with an SMSF who find themselves in that unenviable position with assets that aren’t liquid.

6. Responsibility concerns due to ageing or onset of mental illness

Some older people may prefer to use an SAF because they have reached an age where they are no longer able, or may not want to, make effective management and operational decisions. SAFs still allow investors to be in charge of the asset allocation – subject to trustee approval (but they are becoming a lot more flexible) – and to maintain or acquire a similarly broad range of assets and avail of strategies available to SMSF investors. Problems often arise in an SMSF when an older trustee loses the capacity to function and participate in the fund’s inner workings whereas in an SAF, the professional licensed trustee will continue to manage the fund for the benefit of its members.

7. Estate planning

There are a number of estate planning scenarios where an SAF being a better alternative to an SMSF. In an SMSF, the death of a fund trustee changes the composition of the trustees and may provide potential for disputes especially in blended families. In an SAF, the licensed trustee is an independent and unbiased party with no family relationship issues that we often see arise with estates. In an SMSF, it is possible to try to include safeguards into the trust documentation; however, if one of several feuding beneficiaries has the cheque book, it may take the remaining beneficiaries considerable time and expense to track down the person and the money. As one colleague said:

“a remaining trustee with a cheque book can do a lot of damage to an SMSF balance while family fight for control in the courts”

8. Taking care of vulnerable beneficiaries

SAFs can provide very tax effective death benefit income streams to intellectually disabled adult children. The hurdle of the person with a disability or their legal personal representative needing to be a trustee is removed because, unlike an SMSF, an SAF has a professional trustee. The use of the professional trustee also ensures that ongoing services can continue to be provided to a disabled person is over 18 and once the parents have died or lost capacity. There is the ability to pay a death benefit income stream to the disabled child and then have any capital remaining return to the parent’s estate on death.

9. Employer – Employee Fund

In an SMSF, a trustee cannot be an employee of another member – unless they are family. In an SAF however, a member can be an employee of another member. Further, since SAFs have a professional licensed trustee, the related-party issues that crop up in an SMSF are not an issue in an SAF.

In summary while an SMSF may be ideal for people who want to be fully in control of their investment decisions and retirement savings, an SAF is ideal for those who would like to actively participate in investment decisions but retain a low-level of compliance and legislative responsibilities. It is possible to switch from an SMSF to an SAF or vice versa without incurring capital gains tax as all they have to do is retire as trustees themselves and appoint a professional licensed trustee to govern their SAF.

So why may a SAF be a better option than a Retail or Industry Fund?

Moving to a SAF is Not a CGT event whereas it would be if you moved to a retail or industry fund
Likely to be able to keep assets such as direct shares, bullion, collectables and residential and commercial property subject to rules.
The member can still direct investments within the approved list
Member directed death benefit nominations are still possible and in fact often more achievable as the trustee can follow your wishes.
No issues with single member funds
Retains privacy for those in high-profile positions

I would like to acknowledge that much of my information in this area has been gathered from articles and presentations by Julie Steed of Australian Executor Trustees who are very experienced in running SAFs and working as a team with clients and their financial planners.

I hope this guidance has been helpful and please comment below. Feedback always appreciated. Please reblog, retweet, like on Facebook etc to make sure we get the news out there. As always please contact me if you want additional information on switching fund structures.We have offices in Castle Hill and Windsor but can meet clients anywhere in Sydney or via Skype. Just click the Schedule Now button up on the left to find the appointment options.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

Leave a comment

by SMSF Coach - Liam Shorte on August 29, 2016 • Permalink

Posted in Estate Planning, SMSF Exit Strategies, SMSF Management, Trustee

Posted by SMSF Coach - Liam Shorte on August 29, 2016

https://smsfcoach.com.au/2016/08/29/small-apra-fund-as-an-exit-strategy-for-smsf-trustees/

A Dream without a Plan is just a Wish – Dare to Dream

Source: FPA Dare to Dream national research report conducted by McCrindle Research, August 2016

So do you or a family member or friend talk about your future dreams of an early retirement or what you plan to do in retirement but then give a big sigh and say it is “Just a dream” or “a pipe dream” or maybe put it in the “to hard basket” to try and achieve those goals. Realistic goals are achievable with good planning and some of the whackier ones just take a little more effort or courage!

Did you know that this week is Financial Planning Week? Every year, the Financial Planning Association (FPA) holds Financial Planning Week, to remind Australians about the importance of financial planning.

The theme for this year is “Dare to Dream” and I think it’s a great reminder of why we need a plan in place to realise our biggest dreams. After all, financial planning is not just about numbers – it’s about deciding what we want out of life, then putting in steps to achieve it. It’s also a nice reminder about the importance of financial independence – whatever life stage we find ourselves at.

This short video featuring Jane Caro sets the scene to the dare to dream challenge:

So are you ready to read a bit more? Something you might find particularly interesting, is the Dare to Dream research report which has some eye opening insights about how Australians feel about their financial future. The report highlights that whilst one in two Australians dream more about the future now than five years ago, a massive 63% have made “no plans” or “very loose plans” to practically achieve those dreams. Just click the link Dare to Dream research report

The report also shows that property is still a big part of the ‘Great Australian Dream’ (surprisingly even for Gen Y), and that the biggest financial regret in life for Australians is a lack of saving (a huge 47% stated this!). The report is well worth a read.

The FPA has also developed a fun online quiz, to help you discover what kind of financial personality you are. I encourage you to take the quiz and share it on Facebook with your family and friends. You can access this quiz here at Dreamer Profiles

Oh in case you want to know I got “Mover and Shaker” as my financial personality ….my dreams have already been put in to an Action Plan…what about yours?

I hope this guidance has been helpful and please take the time to comment or at least let me know what your personality result was! Feedback always appreciated. Please reblog, retweet, like on Facebook etc to make sure we get the news out there. As always please contact me if you want to look at your own options and achieving those dreams. We have offices in Castle Hill and Windsor but can meet clients anywhere in Sydney or via Skype. Just click the Schedule Now button up on the left to find the appointment options.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

Leave a comment

by SMSF Coach - Liam Shorte on August 23, 2016 • Permalink

Posted in Enduring Power of Attorney, Estate Planning, SMSF Management, Trustee

Posted by SMSF Coach - Liam Shorte on August 23, 2016

https://smsfcoach.com.au/2016/08/23/a-dream-without-a-plan-is-just-a-wish-dare-to-dream/

ATO Clamps Down on Trustee for Superannuation Early Release Scheme

In my earlier blog Get Super Scheme Smart – ATO warns on dangers of retirement planning schemes I went through the ATO guidance and their push to educate trustees about early release schemes and fraud attempts. In a recent case they showed that they will enforce the penalty regime where a trustee has deliberately flouted the rules. The penalty, $40,000 and loss of right to be a trustee in future.

The case of Deputy Commissioner of Taxation v Rodriguez resulted in significant penalties being imposed following a large number of unauthorised withdrawals by an SMSF trustee.

In this case, the fund trustee fabricated a loan arrangement, made cash withdrawals to purchase gold bars (later selling them and depositing the proceeds of sale into his own bank account), as well as making a number of other unauthorised withdrawals for his own personal benefit over a number of years.

The court considered that there had been the following contraventions of the SIS Act:
− in making the loans and giving financial assistance the trustee failed to ensure that the fund was maintained solely for one or more of the purposes prescribed in section 62(1)
− in making the loans and giving financial assistance, the trustee failed to ensure that the fund did not lend money or give any other financial assistance using the resources of the fund to a member, contravening section 65(1)
− the trustee failed to prepare a written plan specifying: the amount by which the in-house assets of the fund exceeded the market value ratio of 5% at the end of each income year; and the steps by which the trustee proposed to dispose of the in-house assets equal to or greater than the excess amount, contravening s 82.

In imposing the penalties, the court took into account the trustee’s cooperativeness with the ATO, investigating officers, solicitors and the court process. The court also accepted that the trustee was contrite and apologetic, and was a person of good character. It was also apparent from the material before the court that the trustee was a troubled person at the time of the contraventions.
It should also be noted that some attempt had also been made to repay amounts withdrawn (including an interest component).

In addition to a monetary penalty of $40,000, the trustee was barred from acting as a trustee.

This should be taken as a strong warning to small business owners and company directors who may also endanger their ability to control their business or be a company director in their business life because of issues caused by managing their Self Managed Superannuation Fund poorly.

For those who feel the additional risk of running an SMSF may expose their career to unacceptable risk then they should consider a retail or industry fund or if you have assets that are unable to be held via one of those, like a property, art or bullion, then you should consider moving the Trustee responsibilities to a professional trustee via a Small APRA fund. I will deal with this option in a future blog.

If you are in a position of financial hardship or want to do a complex investment then why not contact us to se if there is a legal way to achieve the same goal without getting yourself in trouble.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

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by SMSF Coach - Liam Shorte on August 22, 2016 • Permalink

Posted in Enduring Power of Attorney, Estate Planning, SMSF Management, Trustee

Posted by SMSF Coach - Liam Shorte on August 22, 2016

https://smsfcoach.com.au/2016/08/22/ato-clamps-down-on-trustee-for-superannuation-early-release-scheme/

Get Super Scheme Smart – ATO warns on dangers of retirement planning schemes

The old adage “if it sounds too good to be true then it usually is” holds firm especially with superannuation “release” schemes. The ATO is stepping up its education efforts to help consumers while clamping down on promoters of such schemes. Here at SMSF Coach and our sister firm Verante Financial Planning we are always willing to offer a second opinion on any recommendation you are concerned about.

The Australian Taxation Office (ATO) is extending a helping hand to pre-retirees through Super Scheme Smart, a new initiative launched recently that educates people on the dangers of risky and illegal retirement planning schemes.

The ATO has identified a significant number of retirement planning schemes designed solely to help people avoid paying tax on their assets in an illegal manner and is working to close these down.

From the ATO media video below with ATO Deputy Commissioner, Michael Cranston, he warns:

While retirement planning schemes can vary, there are some common features that people should be aware of. Usually these schemes:
• are artificially contrived and complex, usually connected with a SMSF
• involve a lot of paper shuffling
• are designed to leave the taxpayer with minimal or zero tax, or even a tax refund
• aim to give a present day tax benefit by adopting the arrangement

Individuals caught using an illegal scheme identified by the ATO may incur severe penalties under tax laws. This includes risking loss of their retirement nest egg and also their rights as a trustee to manage and operate a SMSF.

The ATO is delivering practical help and information through their Super Scheme Smart website, including a comprehensive information pack, case studies and videos, as well as sending taxpayer alerts into the community about schemes and why they don’t fit within the law.

Mr Cranston urged people undertaking retirement planning to remain vigilant and to come forward if they believe they are at risk or are already involved in a scheme.

“Retirement planning makes good sense provided it is carried out within the tax and superannuation laws. Make sure you are receiving ethical professional advice when undertaking retirement planning, and if in doubt, seek a second opinion from an independent, trusted and reputable expert.

“We do our best to shut down dodgy schemes but the best defence is working together. Blowing the whistle on those promoting retirement planning schemes will help us stop them from risking your or others’ retirement savings,” Mr Cranston said.

All those approaching retirement who are yet to get “Super Scheme Smart”, are encouraged to take advantage of these resources and report promoters of dodgy schemes by calling 1800 177 006, or via email to reportataxscheme@ato.gov.au

Some examples provided of the current schemes they are concerned about include:

The schemes the ATO are currently worried about include:

Dividend stripping – Where the shareholders in a private company transfer ownership of their shares to a related SMSF so that the company can pay franked dividends to the SMSF. The purpose being to strip profits from the company in a tax-free form. (refer to Taxpayer Alert (TA 2015/1))
Non-arm’s length limited recourse borrowing arrangements – When an SMSF trustee undertakes limited recourse borrowing arrangements (LRBAs) established or maintained on terms that are not consistent with an arm’s length dealing. For more information, see Practical Compliance Guide.
Personal services income – Where an individual (with an SMSF often in pension phase) diverts income earned from personal services to the SMSF where it is concessionally taxed or treated as exempt from tax (refer to Taxpayer Alert (TA 2016/6)).

As mentioned above at Verante Financial Planning we take very good care of our clients and ensure all our client strategies are fully compliant and tick all the boxes so our client can sleep securely at night know that while they have used the superannuation and tax systems to maximise their savings position, they are always within the regulations and the spirit of the law.

The whole focus of this blog, the SMSF Coach is about educating and promoting use of legal strategies and we are consistently warning people of the pitfalls of some strategies and investments out there such as our recent warning on the failed GUEVRA IPO not being suitable for SMSF clients or our very popular Property through super in a SMSF – Part 3: 20 most common mistakes

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

1 Comment

by SMSF Coach - Liam Shorte on July 27, 2016 • Permalink

Posted in Enduring Power of Attorney, Estate Planning, SMSF Management, Trustee

Posted by SMSF Coach - Liam Shorte on July 27, 2016

https://smsfcoach.com.au/2016/07/27/get-super-scheme-smart-ato-warns-on-dangers-of-retirement-planning-schemes/

Why Every SMSF Member Should have an Enduring Power of Attorney

Let’s start with a definition of what is an Enduring Power of Attorney (EPoA).

An enduring power of attorney is a legal agreement that enables a person to appoint a trusted person – or people – to make financial and/or property decisions on their behalf. An enduring power of attorney is an agreement made by choice that can be executed by anyone over the age of 18, who has full legal capacity.

We make decisions for ourselves on a range of family, work and lifestyle issues everyday and often we are reluctant to admit that there may come a time when we may no longer be able to do so. People don’t like to think about becoming mentally incapacitated by illnesses such as Alzheimer’s or dementia, or becoming physically or mentally incapacitated as the result of an illness or accident. But if it does occur it is vital there is a vehicle in place allowing someone else to legally make decisions.

If we have legal documents prepared prior to us losing capacity to make them, our decisions can be made by someone we know and trust. If we do not have those documents in place before we lose capacity then decisions may have to be made by a government department set up for the purpose of dealing with financial and personal affairs of an incapacitated person.

Most of us given the choice would probably choose the first one but to do this we need to make the documents whilst we have the mental capacity to make them. A person has capacity to make valid legal documents if they can understand why they are making the document and the choices which may be involved (choosing a person to act for you). You must be able to weigh up the result of giving power to someone else to act for you and you must be able to communicate your decision to make a legal document.

The main reason why we have legal documents giving a person or persons the power to act for us is that they will know our wishes and preferences and will act in our best interests. It is also a cost-effective way of protecting our family, finances and assets.

So why is it important for an SMSF member to have an EPoA

Well except in very limited circumstances, a self managed superannuation fund will only qualify as an SMSF where each member of the fund is either a trustee of the fund or a director of the fund’s corporate trustee. It is because of this threshold requirement for existence as an SMSF that the EPoA becomes a very important document for the SMSF member.

Consider the implications for the SMSF if someone is incapable of making decisions:

How does the SMSF run?
How can documents be executed?
How does a corporate trustee operate?
How can a new trustee appointed?
How will assets be bought or sold?
How are pensions or lump sum withdrawals approved and facilitated?

If there isn’t an EPoA what can happen?

Documents requiring two signatures, can’t be executed
Possible Audit contravention
The ATO may render the fund non-complying
Cannot roll-out an incapacitated member as SIS regulations require member consent (can’t be given if incapacitated)
Apply to QCAT, VCAT, NCAT, SAT(for WA) – Civil and Administrative Tribunal
Apply for guardianship
But who will they appoint? Surviving spouse, son/daughter, Public Trustee?
Do you think the Public Trustee wants to be running a SMSF?
What happens to the SMSF while waiting?

Technical Part (I don’t like to quote reams of legislation but sometimes it is necessary)

Subsection 17A(3) if the Superannuation Industry (Supervision) Act 1993 (SISA) provides that an SMSF will continue to be an SMSF where, amongst other things:

(b) the legal personal representative of a member of the fund is a trustee of the fund or a director of a body corporate that is the trustee of the fund, in place of the member, during any period when:

(i) the member of the fund is under a legal disability; or

(ii) the legal personal representative has an enduring power of attorney in respect of the member of the fund;

The term “legal personal representative” is defined at subsection 10(1) of the SISA as follows:

… the executor of the will or administrator of the estate of a deceased person, the trustee of the estate of a person under a legal disability or a person who holds an enduring power of attorney granted by a person.

So, in short, under the superannuation legislation:

the enduring power of attorney is the key to allowing a fund to continue to qualify as an SMSF notwithstanding that the member may not be acting as trustee of the fund;
the enduring power of attorney “relief” can be invoked to assist not only when the member is under a legal disability.

However, as also evident from the above, the fact of the EPoA being drawn up, properly signed and sitting in someone’s drawer is not enough.

Implementing the exercise of the EPoA with your SMSF

In order to meet the requirements set out in the Superannuation Industry (Supervision) Act and the Self Managed Superannuation Funds Ruling SMSFR 2010/2, the following conditions must be satisfied:

The LPR/EPoA must be appointed as a trustee of the SMSF, or as a director of the corporate trustee of the SMSF. The appointment of the LPR/EPoA must be in accordance with the trust deed, the constitution of the trustee company (if any), the Superannuation Industry (Supervision) Act, and any other relevant legislation (such as the Powers of Attorney Act 1998 (Qld), the Guardianship and Administration Act 1990 (WA) and the Corporations Act 2001 (Cth)).

A member who has lost capacity must cease to be a trustee of the SMSF or a director of the corporate trustee upon the appointment of their LPR.

Where the EPoA appoints multiple attorneys, one or more of those attorneys can be appointed as trustee or as director of the corporate trustee in place of the member.

Similarly, multiple members are able to execute an EPoA for the same LPR, who can be appointed as a trustee or a director of the corporate trustee in place of each of those members.

A member is also able to execute an EPoA in favour of an existing member who is a trustee or director of the corporate trustee. In this case, the incapable member can cease to be a trustee, or director of a corporate trustee, and their LPR, already a trustee or director in their own capacity, will also be considered to be appointed in the capacity as LPR for the incapable member.

Acting as a trustee under the EPOA

Once appointed, the attorney performs their duties as trustee or director of the trustee company as a trustee or a director rather than as attorney or agent for the member. The attorney will be subject to the obligations of a trustee and must sign the trustee declaration stating that they understand their duties as a trustee. The attorney cannot be a disqualified person and must be eligible to be appointed as trustee.

The decision to act as an attorney and the legal duties are significant. The attorney must:

Consider the interests of the donor when making decisions as the attorney;
Take care of property/assets;
Avoid conflicts of interest;
Comply with relevant legislation, and
If necessary, prove that they have been appointed your attorney.

In summary

While the decision to grant an EP0A should not be taken lightly, it is an important document which all adult Australian’s should have in place, but it is particularly vital that every adult who is a member of a SMSF execute a valid EPoA. Failing to have an EPoA can result in delays or a financial disaster if a member loses capacity. Having an EPoA will ensure that upon the loss of capacity of a member, the fund can continue to be a complying SMSF.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

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by SMSF Coach - Liam Shorte on July 19, 2016 • Permalink

Posted in Enduring Power of Attorney, Estate Planning, SMSF Management, Trustee

Posted by SMSF Coach - Liam Shorte on July 19, 2016

https://smsfcoach.com.au/2016/07/19/why-every-smsf-member-should-have-an-enduring-power-of-attorney/

How you can Fund Children’s Education in your Will

Well this blog is not about Self Managed Super Funds but is about a matter close to the hearts of many of my clients. As a parent or grandparent, ensuring that children receive a good education is one of the most common concerns raised with us at Verante. Many people want to leave provision in their wills for such costs so here is one of our preferred strategies.

You can establish a dedicated education fund through a testamentary trust in your Will. This is a tax-effective and flexible way to provide for the education of your children or grandchildren. It can also help to ensure that the funds you want to be applied for their education are preserved and not misused by young beneficiaries or caught up in the complications caused by the rise of complicated blended families (his, hers and ours issues).

If you are a grandparent, leaving bequests via a testamentary trust for payment of education fees and related costs for your grandchildren is a more tax effective method of providing for their education rather than leaving additional bequests to their parents that may be caught up in marriage breakdowns, business bankruptcy or litigation.

What is a testamentary trust?

In general, a trust describes an ownership structure where the assets of the trust are held by a person or organisation (the trustee) for the benefit of other individuals or organisations (the beneficiaries).

A testamentary trust is a trust that is created within and by your Will. You need to arrange it as part of your Will making but it only comes in to effect on your death.

A testamentary trust may be created using specified assets, a designated portion of your estate or the entire remaining balance of your estate. Multiple trusts may be created by the one Will.

Normally the Trustee of this trust will be the executor of your estate, a surviving spouse or sibling of the deceased. You also have the option of appointing an Independent trustee company. Often this trustee will step down when the beneficiary reaches a target age or completes their education.

What is an education fund?

Assets inherited directly by your beneficiaries become part of their personal assets and are under their control. The future of these assets depends on the beneficiary’s ability to manage their own financial affairs, with no guarantee that the assets will be applied for any particular purpose, such as their education.

An education fund is a trust which focuses on funding the education of a particular beneficiary (the ‘primary beneficiary’). It gives you assurance that the income of the trust will be directed to the educational and other purposes you have specified in your Will.

You set the terms of the testamentary trust in your will. These terms can restrict the ability of any of the beneficiaries to control the activities and investments of the trust or give them complete control. You are in effect choosing to ‘rule from the grave’ to ensure that the inherited assets are protected and used sensibly for the benefit of the primary beneficiary

How does an education fund operate?

The typical features included in an education fund are:

The trust can be funded by your some or all of your assets and by payments in consequence of your death such as superannuation death benefits or insurance proceeds paid to your estate.
A proportion of your estate is held on trust until the primary beneficiary (child/children) achieves a particular level of education or satisfies other conditions established in your Will. Many of our clients choose age 25.
The trustee has the power to apply the income and capital of the trust for a variety of purposes specified in your Will for the benefit of the primary beneficiary, with the emphasis being on the educational needs of the primary beneficiary.
During the financial year, income and capital are distributed to the primary beneficiary to the extent required for the approved purposes. Any remaining income is either accumulated within the trust or distributed to other beneficiaries, as directed by the Will.
When the primary beneficiary has satisfied the conditions specified in the Will (such as attaining a particular level of education or age), they gain control of the remaining balance in the education fund and may either continue the trust or vest it (end it) at any time.
If the primary beneficiary fails to satisfy the conditions within a specified period, the trustee may determine that the remaining balance in the education fund be distributed to other beneficiaries named in the Will or held on trust for the education of those beneficiaries (or their descendants).

An education fund will normally be a mandatory trust imposed upon the beneficiary due to your desire that they continue their education to a specified level. The beneficiary will not normally be given the option of terminating the trust or eventually inheriting the trust without satisfying specified conditions.

Example

George and Helen have a combined estate worth $1,500,000. They have three young grandchildren whom they wish to make their beneficiaries as they had already helped their children to set themselves up as financially secure.

George and Helen are concerned that, in the event of their deaths, their grandchildren will not be sufficiently mature to use their inheritance responsibly. They wish to establish an education fund to ensure that the grandchildren are encouraged to further their education, but are also adequately provided for during their developing years.

As a result, George and Helen’s Wills provide that 50 per cent of the inheritance received by a child ($250,000 each) will be held in testamentary trust funds on the following terms:

Until the beneficiary turns 25, their access to the income and capital of the trust is limited to specified purposes, such as:
- education expenses, including HECS liabilities
- hospital and medical expenses
- rent or accommodation charges
- electricity, gas and other utility payments
- maintenance and income support at the discretion of the trustee.

If a specified level of tertiary education has been completed by the age of 25, the beneficiary will be given full control of the trust at the time of attaining that educational level, with the ability to either continue the trust for tax planning purposes (as a tax-effective vehicle for supporting the education of their own children) or terminate it.
If the beneficiary does not attain the required level of education by the age of 25, the remaining balance of the education fund will be distributed amongst charities specified in the Wills.

The education funds will ensure that each child is adequately supported, but also given an incentive to further their education. If all children were from the one family you could use just one Trust.

Additional issues to discuss with your legal expert

Common areas which require further thought are:-

Whether to have one or several Trusts established under the Will
The selection of the appropriate trustee or trustees
The method of appointing replacement trustees
Whether some classes of beneficiaries are restricted to income and some to capital

Back-up Strategy

There is a second chance for your family to establish a testamentary trust after you die but this second chance must be taken advantage of within three years of your death. This enables a trust to be established from your assets and for the income to enjoy the same tax advantages as income derived through a testamentary trust. However, the assets used to establish the trust cannot exceed the amount which the beneficiary would have received under the law, if you died without a Will.

I hope this guidance has been helpful and please take the time to comment. Feedback always appreciated. Please reblog, retweet, like on Facebook etc to make sure we get the news out there. As always please contact me if you want to look at your own options or get a referral do a recommended Estate Planning solicitor. We have offices in Castle Hill and Windsor but can meet clients anywhere in Sydney or via Skype. Just click the Schedule Now button up on the left to find the appointment options.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

Leave a comment

by SMSF Coach - Liam Shorte on July 11, 2016 • Permalink

Posted in Education costs, Estate Planning

Posted by SMSF Coach - Liam Shorte on July 11, 2016

https://smsfcoach.com.au/2016/07/11/how-you-can-fund-childrens-education-in-your-will/

12 Triggers to Review your Legal Documents or Estate Planning Arrangements

OK I am going to be a bit morbid today but based on the lack of preparation by many new clients I think we need to talk death, mental incapacity and other things legal. Why me? Because for some reason many seem scared of lawyers so I want to give you good reasons to overcome that fear!

When did you last review your will, your enduring power of attorney (“EPOA”) and your appointment of enduring guardian (“EG”) documents and of course your SMSF Trust Deed.

As a financial planner we recommend you personally review these documents every 3 years and have a solicitor review them every 5 years. Just take them out (if you haven’t forgotten the “safe place” you put them!) and have a look through them after considering changes to you family circumstances including the following triggers.

So here is a list of the changes to your circumstances that should prompt you to review these documents as soon as possible and which may even require you to create new documents or update existing ones.

These changes include:

1. Setting up an SMSF or making a large or non-standard investment via your SMSF

Ok as a SMSF blog you know I had to deal with this first. When you first set up an SMSF you may have been told to read the deed but did anyone tell you it’s essential to appoint your Enduring Power of Attorney to ensure the SMSF can continue to run smoothly if your health deteriorates.
If you decide to make an unusual investment or loan or arrangement in your fund the you must first know that your SMSF Deed and Investment Strategy allows such a move. So read the SMSF deed and have a written SMSF investment strategy.

2. Marriage automatically revokes a will, unless the will was made in contemplation of marriage. After you marry, you should make a new will.

Your Power Of Attorney is not revoked by marriage. If your EPOA was signed before your marriage it is still effective. However, if, for example, your EPOA appointed your former spouse, you may wish to formally revoke the EPOA and make a new EPOA appointing another person as your attorney.
Your appointment of an Enduring Guardian is revoked on marriage even if you appointed your current spouse as your EG. After marriage, you need to sign a new appointment of EG document.
If you wish to bring your new spouse into your SMSF then you need to follow the rules of appointing a new trustee or director and accepting a new member. Read the deed and the company trustee constitution. Don’t forget to notify ASIC.
Check your Binding Death Nomination and any reversionary pensions.

3. Separation

Unlike marriage, separation does not affect the validity of your will. As a result, there have been several cases where a couple have separated, one spouse has died after separation but before the divorce and their former spouse has been entitled to the whole of their estate either due to their failure to update their will after separating or by not having any will in place at all and the rules of intestacy applying in favour of their former spouse.
Similarly, your EPOA and EG documents will not be affected by separation. You should consider whether you need to revoke the existing appointments and make a new EPOA and appoint a new EG after separating
There maybe some allowances for the transfer of SMSF assets in the event of a finalised property settlement and again you need to understand the exceptions that apply once the financial/property settlement has been agreed and signed off and read the deed before assuming you can move or split assets.
Check your Binding Death Nomination, insurance nominations and any reversionary pensions

4. Divorce

I know I am repeating myself but Check your Binding Death Nomination , insurance nominations and any reversionary pensions.
There are specific rules allowing the transfer of SMSF assets in the event of divorce without triggering CGT or Stamp Duties and again you need to understand the exceptions, the process and read the deed before assuming you can move or split assets.
Divorce does not revoke your EPOA or EG documents appointing your former spouse. In order to cancel these appointments, you need to sign a revocation and serve it on your former spouse.
Divorce only revokes or cancels any gift made in your will to your former spouse. It also cancels your spouse’s appointment as executor, trustee or guardian in your will. It does not cancel the appointment of your former spouse as trustee of property left on trust for beneficiaries that include the children of you and your former spouse. However this will not apply if the Court is satisfied you did not intend to revoke the gift or the appointment by the divorce. Instead of leaving these matters to the Court, if you have not made a new will after separating, it is imperative that you make a new will as soon as possible after your divorce.

5. Birth of an additional beneficiary.

This is likely to necessitate a change to an existing will unless your solicitor has catered for future arrivals. This is another care where being too specific can require frequent updates and legal fees.

6. Death of a spouse, an existing beneficiary, your executor, your attorney or your EG.

Review your will, Enduring Powers of Attorney and Enduring Guardianship, Binding Death Nomination, insurance nominations and any reversionary pensions.
Do you need to appoint a new individual SMSF trustee or director to keep your SMSF compliant?

7. A change to the needs of your children or grandchildren

Review your will and look at Testamentary Trusts or Special Disability Trusts. Last thing you want is for your beneficiary to lose their Disability Pension because of an inheritance.

8. A material change in your financial circumstances.

Have you sold or transferred assets that would have formed part of your estate? Make sure you have not mistakenly left someone with nothing.
If you have been bankrupted or considering filing for bankruptcy then you will not be able to continue as a member of your SMSF. You need to look at rolling to a Small APRA fund or a retail fund.
You also need to have your own parents if still with us to reconsider any direct inheritances to you as your creditors may grab them.

9. A breakdown in a relationship with relatives or friends who you may have appointed as:

the executors of your estate;
beneficiaries under your will;
guardians of your minor children; and/or
your attorney or your EG

10. The decline in health or some other change of circumstances

For example bankruptcy of a child (let’s face it, everyone under 30 thinks they are an entrepreneur and that’s going to lead to trouble!) so that, for example, a beneficiary under your will may no longer be able to manage their own finances,
The person you appointed as your executor, your attorney or your EG may no longer be suitable or capable of administering your estate or managing your affairs or making personal decisions for you.
If it is you or your spouse who have been diagnosed with onset of dementia or Alzheimer’s for example then you need to decide if you should have your EPOA step in now rather than later to help manage your self managed superannuation fund.

11. Retirement

Retirement often results in people restructuring their affairs. This is an ideal time to be proactive in your estate planning and possibly consider setting up tax effective arrangements through your will that you have not done previously.
Have you started a pension in your SMSF? Have you documented it properly including a reversionary pension election or Binding death nomination?
Have you sold assets like a business premises or investment property previously allotted to someone specific in your will? Are they losing that benefit!

When any of these events occur, you should review your SMSF and estate planning documents and, if necessary, create new documents taking into account the relevant change of circumstances. Don’t be afraid to ask advice but make sure you are dealing with a specialist in each area.

If you have been paying attention you will notice I said “12 Triggers”. Well I’ll leave the 12^th for you to add in the comments section below. Come on I must have missed a few and I know some really sharp minds read this blog so help us out! I will add the best one to this list after a month or add my own, so why not subscribe to the blog in the “Free email updates” section on the left hand-side of the page.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? Then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

Adapted from an original article “Time for an estate planning “check-up” by BWS Lawyers

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

1 Comment

by SMSF Coach - Liam Shorte on March 2, 2016 • Permalink

Posted in Checklists, Estate Planning, SMSF Management

Posted by SMSF Coach - Liam Shorte on March 2, 2016

https://smsfcoach.com.au/2016/03/02/12-triggers-to-review-your-legal-documents-or-estate-planning-arrangements/

11 most common Family Trust Deed faults that can still be rectified

I am always on the look out for interesting tips for clients and while this may not necessarily SMSF related, many of my readers are also involved in family or discretionary trusts. I came across a blog from Dr. Brett Davies at Legal Consolidated over the weekend and found it useful for my own circumstances so, with his permission, I am “paying it forward”.

In his blog Son lost the farm to his sisters – Family Trust guilty he explained how the best intentions of a person in setting out their wishes and division of their assets on death can be overturned by not understanding how control of assets is managed and passed on properly to the intended beneficiaries when dealing with companies and trusts. I’ll leave you to read the blog yourself but I will point out the key 11 issues Brett and his team identified from reviewing thousands of trust deeds over the last few years. Take the opportunity to review your trust deed and look for the ability:

For the Commonwealth Bank and other lenders:
· indemnify out of trust assets
· allowing conflict of interest under both statute and common law
· increasing the class of investments including exotics, warrants, derivatives and options
Allowing greater powers and methods of amending the trust deed
Improve Asset Preservation, strengthen bankruptcy protection and ensure no Partnership relationships
Changing trustee with minimum stamp duty, especially for land rich trusts
Managing Division 7A issues and avoiding automatic breaches
Change the vesting date pursuant to the new taxation cases
Change jurisdictions to allow forum shopping and ease of litigation
Change beneficiaries and classes of beneficiaries (but subject to CGT rules)
Allowing changes to the trust to be verbal and via minute or any other mechanism
to adapt the general ‘Streaming provisions’ based on ATO’s latest rulings:
· franking credits
· streaming different classes of income and capital for minors for deceased estates, life insurance and super funds
· attribution relating to distributing capital gain to beneficiaries
· Bamford Decision including defining ‘income’
· Loss Recoupment
to decide if the majority of Appointors should be able to take all the proceeds of the trust over the minority or not.

Maybe take this list to your advice team (solicitor, accountant and financial planner) and ask them to review your trust deed and estate planning to ensure you have a trust that can confidently meet your needs and manage your affairs for you while alive and for your ultimate beneficiaries. If you are not sure your legal advisers are up to it then ask us to put you in touch with Brett and his team at Legal Consolidated or to liaise with your current solicitor.

Looking for an adviser that will keep you up to date and provide guidance and tips like in this blog? Then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options. Do it! make 2016 the year to get organised or it will be 2026 before you know it.

Please consider passing on this article to family or friends. Pay it forward!

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

3 Comments

by SMSF Coach - Liam Shorte on February 15, 2016 • Permalink

Posted in Estate Planning, Tax Planning

Tagged bamford, discretionary trusts, family trusts, Truste deeds

Posted by SMSF Coach - Liam Shorte on February 15, 2016

https://smsfcoach.com.au/2016/02/15/11-most-common-family-trust-deed-faults-that-can-still-be-rectified/

The Annihilation of Your Assets – Estate Planning

I am always looking for quality articles to help my clients and here is a great guest post today from Bryan Mitchell of Mitchells Solicitors in Brisbane on how poor drafting of your will or a lack of a regular review of assets mentioned in a will may leave your intended beneficiaries out-of-pocket. While not focusing specifically on SMSF matters, your will is a very important part of overall wealth management.

The doctrine of ademption

What happens to assets listed in a will that no longer exist when the will-maker dies? It might sound like an obscure question, but in fact it is becoming more common as the population ages. Often, the biggest asset people own as they age is their family home. And sometimes, they can no longer live in that home and must move into assisted living. It’s common practice to sell the family home to pay for that care. All well and good until the older person eventually passes away, and the will is found. The beneficiaries discover that the deceased has left them the property held at 182 Birkdale Rd, Birkdale. Where is that asset? the lawyer asks. It was sold to pay for the nursing home, the beneficiaries say. It no longer exists. So swings into action the doctrine of ademption, which means that a specific gift fails if its subject matter has ceased to exist as part of the testator’s property at death. The doctrine of ademption operates on the assumption that if the property cannot be found, the gift cannot take effect. What ruffles the feathers more is the case of real property: a specific testamentary gift of real property will fail if it is sold before death, even if the proceeds from the sale can be traced. The beneficiaries are not entitled to the proceeds of its sale. So the children who might have expected to inherit the Birkdale property now stand to inherit nothing. The only exception is where an agent or attorney through fraud or an unauthorised transaction sells or transfers the asset. Sometimes there may be right for a beneficiary who has missed out to make a claim for compensation even where there has been no fraud or unauthorised transactions, but that is another topic.

Bryan Mitchell – Solicitor
http://www.mitchellsol.com.au
(07) 3373 3633

Ban v The Public Trustee of Queensland [2015] QCA 18 Ms Ban and Mr ADF had been friends for a long time. As Mr ADF aged, he became unwell as his cognitive function declined and he was eventually diagnosed with dementia. Ms Ban held the Power of Attorney for Mr ADF for personal and financial matters. At around the same time that Mr ADF was hospitalised in a confused and disoriented state, he entered into a contract of sale for a property at Park Ridge. The property was sold for $2.25 million and the funds were placed in an account in the names of Ms Ban and Mr ADF. When Mr ADF passed away, his will revealed that the Park Ridge property had been mentioned specifically. In fact, the will stipulated that the Park Ridge property was gifted to the Queensland State Government, and that the property was not to be sold until the fifth anniversary of his death. Ms Ban used the funds for her own benefit, including her wedding, a political campaign, and home renovations.Because she was convicted and fined for misappropriating the funds, the doctrine of ademption will not stand. The beneficiaries of that gift (in this case, the state government of Queensland) could get compensation or make a claim on the estate. Hay v Aynsley [2013\ NSWSC 1689 The willmaker, Mrs Brook, had three adult children, Peter, Louise and David. Her husband, Mr Brook, pre-deceased her by three years. Prior to his death, he was granted a power of attorney for his wife in need. Upon his death, the Power of Attorney was granted to Louise and David jointly. David also pre-deceased his mother, leaving Louise with sole Power of Attorney authority for her mother. Mrs Brook suffered from dementia, lacked legal mental capacity and Louise acted for her mother under the authority of the Power of Attorney. She decided to sell land owned by Mrs Brook at Soldiers Point in 2011, collected net proceeds of the sale of $360,000 and placed the money in a bank account, accruing interest. Mrs Brook died in 2012 and the will was granted probate. However, specific stipulations within the will gave rise to questions of what the willmaker would have wanted. Mrs Brook, in her will, gave a property to her daughter Louise, at Round Corner. She also gave the property at Soldiers Point to her son, David. The remainder of the estate, which was minimal, would be shared in one-third equal shares to Peter, Louise and David. A further stipulation allowed that if any of Mrs Brook’s children should die before she did, that their share of the estate would be held in a trust for her grandchildren. The question we are looking at in this case is whether the sale of the property at Soldiers Point adeemed the gift to David, who himself had passed away, and whether David’s own heirs were due to receive both the value of the property plus the one-third share of the remaining estate. The judge ordered that the Soldiers Point gift was adeemed (ceased to exist) by virtue of the sale of the property and that the residual estate, including the proceeds of the sale and accrued interest, would be broken up in thirds. In this case, the children of the late David Brook miss out on the value of the property of Soldiers Point, receiving only a third of it. This is how the doctrine of ademption can cause heirs to receive much less from a will that perhaps the will-maker intended. How can I avoid the doctrine of ademption? Reassuringly, it’s not difficult to ensure the ademption won’t apply. The use of back-up clauses is especially useful. For example, if the intent is to give the property at Birkdale, have a back-up clause that applies if the gift fails, providing for a sum of money or a share of the estate. The important issue to remember here is that though ademption is an obscure doctrine that very few people have heard of, it still applies. And it is not a rare occurrence. Therefore, it is vitally important that people:

Do not write-up their own wills
See a specialist who understands the doctrine of ademption
Have a will that is clear, concise and thorough

For those who prefer to watch and listen then hear more from Bryan on the Doctrine of Ademption. https://youtu.be/5PXWFzcH4No Are you looking for an advisor that will keep you up to date, access to quality professionals and provide guidance and tips like in this blog? Then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

Image courtesy of Mitchells Solicitors – Brisbane Phone for a FREE Consultation – (07) 3373 3633

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by SMSF Coach - Liam Shorte on July 16, 2015 • Permalink

Posted in Estate Planning

Posted by SMSF Coach - Liam Shorte on July 16, 2015

https://smsfcoach.com.au/2015/07/16/the-annihilation-of-your-assets-estate-planning/

ATO video: SMSF planning for the unexpected (relationship breakdown, incapacity, death)

Most of us who run SMSFs are optimistic as far as our own capabilities and relationships are concerned and that is why we take control of our own finances and plan for the future of our own family. But life can throw curve balls at us (damn I hate using American euphemisms) and we need to be prepared for many of those factors we cannot control.

Foreseeable but unexpected issues such as a relationship breakdown, incapacity or an untimely death all too often catch us by surprise. for SMSF Trustees these are risks that needs to be managed, planned for and reviewed regularly to ensure our funds can be maintained in the short to medium term allowing for our wealth to go where we want it and tax effectively if possible and without disposing of assets in a fire sale.

The ATO have provided yet another little cracker of an educational video for SMSF trustees on planning for the unexpected (relationship breakdown, incapacity, death).

There are a few things to consider when making your plans.

You need to have a plan for what will happen to the fund if a member leaves. It may mean adding a new SMSF member, changing the type of fund or winding up the fund.

Payments from your SMSF must meet the rules in the SMSF trust deed so make sure it covers situations like incapacity, terminal illness or death of a member.

Payments must also meet tax and super laws. In some cases, you may have to withhold tax before paying a super benefit.

You need to consider the insurance needs of members when you set up your investment strategy.

You should consider making a binding death benefit nomination if you want to say who will get your super benefits when you die. An SMSF adviser or estate planner can help you get this right.

It’s also a good idea to consider what will happen if you become incapable of looking after yourself and your affairs.

You may want to appoint an enduring power of attorney who can act as trustee of your SMSF if it’s ever needed.

If relationships in an SMSF break down, you must be prepared to sort out any issues that arise. You can’t force another member to leave or stay in the SMSF or exclude them from the decision-making process.

It pays to make sure your plans including exit strategies are set from the start so that you are prepared for the unexpected. START THE CONVERSATION NOW!

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

Our copy of our Financial Services guide can be obtained by clicking here or visiting our main www.verante.com.au website.

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by SMSF Coach - Liam Shorte on August 21, 2014 • Permalink

Posted in Estate Planning, SMSF Management, Trustee

Posted by SMSF Coach - Liam Shorte on August 21, 2014

https://smsfcoach.com.au/2014/08/21/ato-video-smsf-planning-for-the-unexpected-relationship-breakdown-incapacity-death/

ATO SMSF Video: SMSF starting to pay a pension

So you have reached that point where you want to access your superannuation or your advisor has told you about the tax effectiveness of starting an income stream or more commonly called a pension. So what are the steps involved?

Once an SMSF moves from the accumulation stage to paying an income stream, there are tax benefits available! Watch this ATO video and learn about the conditions that have to be met in order for you to benefit.

http://youtu.be/cSA0zr_DD-E

When an SMSF moves from the accumulation stage into paying an income stream to a member — there are tax benefits to be had! But — to be eligible the fund must meet certain conditions.

Steps involved in starting a pension or income stream:

A member needs to make a written request to the trustee to start an income stream including some details on what they require and if the pension is to be reversionary to their spouse or partner.

The member receiving the income stream payment must have met a condition of release, for example turning 65. More details here

The type of income stream being paid must be allowed under the law and your fund’s trust deed. Always check your Deed, it’s the instruction manual for your fund

The Trustees of the fund should acknowledge the request and minute the decision to allow the pension based on a condition of release and provide the member with a Pension Agreement and Product disclosure Statement. (this can often be all processed as part of a Pension Kit so just ask your adviser or administrator)

You need to value fund assets when the income stream starts and on one July each year you continue to make payments.

Make sure the minimum income stream payment is paid to the member each year.

You may have to withhold tax from some income stream payments for members aged 55-59. To do this, you’ll need to register for Pay As You Go withholding and complete some forms which you can get from the ATO website here.

At the end of each tax year if more than one member has a share in the fund assets supporting the income stream — you will need an actuarial certificate to work out the tax implications for your fund which is organised by your accountant or administrator.

Even if all members are receiving an income stream, you still have to meet all of your fund’s obligations including arranging the annual audit and lodging the SMSF annual return.

Planning ahead before you start an income stream — and staying on top of the administrative tasks and record keeping will make it easier for your fund to meet all the conditions and enjoy the tax benefits.

Remember — this is a big step for your fund so if you need help you should contact an SMSF professional to help you get it right!

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

1 Comment

by SMSF Coach - Liam Shorte on August 13, 2014 • Permalink

Posted in Pension Strategies, Reversionary Pension

Posted by SMSF Coach - Liam Shorte on August 13, 2014

https://smsfcoach.com.au/2014/08/13/ato-smsf-video-smsf-starting-to-pay-a-pension/

Definition of Dependant for Superannuation Benefits Evolving

I am delighted to have a guest post from Donal Griffin of Legacy Law on the evolution of the dependency and interdependency rules surrounding receipt of superannuation death benefits. Here is Donal’s summary of a an ATO decision from 2014:

On 18 July 2014, the ATO released ATO Interpretive Decision 2014/22 which confirmed their view that a child who cared for an elderly parent was a dependant and in an inter-dependant relationship.

The writer suggests that it is a sign of the times. 10 years ago, people were keen to show that grandparents’ support for their children by paying school fees meant that the grandchildren were financially dependant with the result that superannuation could be paid to them tax free. The ATO have issued rulings to discourage attempts to contrive dependency.

In February 2014, the ATO showed that certain adult children could be dependants. In ATO ID 2014/6, the Commissioner found that “The Youth Allowance payments the taxpayer received were calculated at a lower ‘at home’ rate as opposed to the higher ‘independent’ rate. This indicates that the taxpayer was substantially financially dependent. A comparison of the level of financial support provided by the taxpayer’s parent with that provided by the Youth Allowance payments also indicates that the taxpayer was financially dependent.”

Private Binding Ruling 67744 dealt with a situation where the parent died. The Commissioner found that all of the requirements of inter-dependency were met.

Previously, it was made clear that support and care must be significant and a link to being unwell or suffering emotionally. This was to be beyond the support one would hope to get from a friend or flatmate who prepares an occasional meal.

The AAT in Malek’s case considered whether the support was necessary. In the later Private Binding Ruling 91657, the above authorities were considered and the net question was whether the person would be able to meet their daily basic necessities (shelter, food, clothing etc) without the additional financial support.

Where a parent needs support, most people would consider it part of the usual familial relationship to support them. However, the facts need to demonstrate that what might be termed a normal familial relationship has changed so that there is a demonstrable mutual commitment to a shared life.

It seems that moving in with a parent and supporting them with a commitment to continue to look after them for the rest of their life is sufficient to establish interdependency. The writer suggests that this relationship can helpfully be confirmed in writing by the parent in the course of their estate planning.

Donal Griffin is a Director of Legacy Law Pty Limited and can be contacted at 02 918803980 or at dgriffin@legacylaw.com.au.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? Then why not contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

Leave a comment

by SMSF Coach - Liam Shorte on July 22, 2014 • Permalink

Posted in Estate Planning, Retirement Planning

Posted by SMSF Coach - Liam Shorte on July 22, 2014

https://smsfcoach.com.au/2014/07/22/definition-of-dependant-for-superannuation-benefits-evolving/

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Platform users more likely to use Managed Funds

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SMSF mortgage repayment solutions on death

Payment of insurance benefits as an income stream to spouse

Example: Tax Dependants like spouses

SMSF Cash flow after Jack’s death

what are the tax implications of the pension

Funding benefits from a reserve

Example 2 – Non- Tax Dependants – 2 brothers in a business

So sadly Brad dies …big ahhhh!

SMSF Cash flow after Brad’s death

Other Issues to consider

By the Way – one other reason to cover your exit strategies

What happens if a trustee fails to address insurance in their SMSF?

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What is an Small APRA Fund (SAF)?

Main benefits of the SAF structure

1. Offloading the Compliance risk

2. Administration of the fund

3. Travelling overseas for extended periods

4. Protection and access to Superannuation Complaints Tribunal

7. Estate planning

8. Taking care of vulnerable beneficiaries

9. Employer – Employee Fund

So why may a SAF be a better option than a Retail or Industry Fund?

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So why is it important for an SMSF member to have an EPoA

In summary

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What is a testamentary trust?

What is an education fund?

How does an education fund operate?

Example

Additional issues to discuss with your legal expert

Back-up Strategy

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The doctrine of ademption

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Steps involved in starting a pension or income stream:

Remember — this is a big step for your fund so if you need help you should contact an SMSF professional to help you get it right!

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