9 Tips For Estate Planning With A Self-Managed Superannuation Fund

When it comes to estate planning, many Queenslanders focus on Wills, Enduring Powers of Attorney (EPOA), and family trusts. But they often overlook one of their most valuable assets: their superannuation.

We've written before abut how superannuation does not automatically form part of your estate assets when you die, and the importance of putting in place a binding death benefit nomination. But for those with a Self-Managed Super Fund (SMSF), estate planning becomes even more complex.

If you have an SMSF, here are some essential considerations to ensure your wishes are properly reflected and legally enforceable when the time comes.

In This Article:

• 1. Understand That Superannuation Is Not Automatically Covered By Your Will

• 2. Review And Maintain A Valid Binding Death Benefit Nomination

• 3. Consider Using Your Legal Personal Representative As A Beneficiary

• 4. Check Your Trust Deed And Ensure It Supports Your Planning Intentions

• 5. Decide Between A Reversionary Pension And A Lump Sum Death Benefit

• 6. Understand Tax Implications For Your Beneficiaries

• 7. Plan For Loss Of Capacity

• 8. Be Cautious In Blended Family Situations

• 9. Seek Professional Advice To Avoid Costly Mistakes

1. Understand That Superannuation Is Not Automatically Covered By Your Will

Your superannuation, including any SMSF, does not automatically form part of your estate. This means your superannuation death benefits (which can include your balance and any insurance payouts) won’t necessarily be distributed according to your Will unless specific steps are taken

Instead, they are typically paid at the discretion of the SMSF trustee unless a valid Binding Death Benefit Nomination is in place.

We’ve previously explored the importance of superannuation in estate planning, so if you missed it be sure to read our article on Superannuation Binding Death Benefit Nominations in Estate Planning to understand how your super is distributed after your death.

2. Review And Maintain A Valid Binding Death Benefit Nomination

A Binding Death Benefit Nomination directs the SMSF trustee to pay your superannuation benefits to your nominated beneficiaries. In Queensland, this nomination must comply with both the Superannuation Industry (Supervision) Act 1993 and the Trust Deed governing your SMSF.

Important points to consider:

• Your binding death benefit nomination must be valid, signed and witnessed. It may need to be renewed regularly unless your SMSF trust deed allows for non-lapsing nominations.

• When nominating individuals, note that superannuation beneficiaries in a binding nomination must be dependants as defined under superannuation legislation (such as a spouse, child or someone in an interdependent relationship)

• Appointing your Legal Personal Representative (LPR) as the beneficiary of your superannuation allows the funds to be dealt with through your estate and distributed under your Will to any person, company, or entity (see below).

  
  

3. Consider Using Your Legal Personal Representative As A Beneficiary

By nominating your legal personal representative (LPR) in your binding nomination, your SMSF benefits can be paid into your estate and distributed according to your will.

This is useful if you wish to make complex or conditional gifts through your Will, or otherwise want to manage complex or blended family arrangements or balance gifts between dependants and non-dependants.

However, this approach can expose the superannuation funds to claims against your estate, such as challenges under family provision laws. In Queensland, eligible persons, including spouses, children, and certain dependants, may have a right to contest your Will if they believe they have not been adequately provided for.

By directing your superannuation death benefit into your estate via your Legal Personal Representative (LPR), those funds become part of the estate pool and may be available to satisfy any successful claims. This could potentially reduce the amount ultimately received by your intended beneficiaries.

4. Check Your Trust Deed And Ensure It Supports Your Planning Intentions

Every SMSF is governed by its trust deed, and each deed is unique in its requirements. Before making any estate planning decisions, it is important to:

• Review the current trust deed and any amendments to ensure it aligns with your goals.

• Confirm whether it allows for non-lapsing nominations, reversionary pensions or specific death benefit strategies.

• seek both legal and financial advice as to the limitations, requirements and obligations of the deed.

• update the deed if it restricts your ability to carry out your wishes.

Failing to review your trust deed can undermine even the most carefully considered estate plan, as the deed may contain restrictions or requirements that override your intentions or limit how benefits can be distributed.

5. Decide Between A Reversionary Pension And A Lump Sum Death Benefit

If you're receiving an income stream from your SMSF, you may be able to nominate your spouse or dependant as a reversionary beneficiary, meaning they will continue to receive the pension after your death.

This option has considerable tax implications, Centrelink or government benefits consequences, and can affect the timing of death benefit payments. It is vital to speak with your financial advisor, accountant and a superannuation taxation specialist to ensure you understand the benefits and limitations of this approach.

6. Understand Tax Implications For Your Beneficiaries

While death benefits paid to dependants (such as spouses and minor children) are usually tax-free, benefits paid to non-dependants (such as adult children) may be taxable, especially the taxable component of your super.

Strategies such as withdrawal and recontribution, anti-detriment planning, or using your LPR strategically can reduce the tax burden and maximise the benefit your loved ones receive.

While RHC Solicitors can provide legal guidance on estate and superannuation matters, we are not licensed accountants that can offer financial or tax advice. We always recommend you seek assistance from a qualified financial adviser or accountant where appropriate.

7. Plan For Loss Of Capacity

Estate planning isn’t only about what happens after you die, it’s also about planning for incapacity and en of life healthcare and arrangements.

Under superannuation legislation, all members of an SMSF must also be trustees (or directors of the corporate trustee). If a trustee loses capacity and has not planned appropriately, they may not be able to legally act in that role, potentially placing the fund’s compliance status at risk.

For this reason, it is important to ensure you have an Enduring Power of Attorney (EPOA) in place, and that your EPOA is correctly structured to operate within your SMSF, especially if you are the sole member and trustee. Your attorney may need to manage your SMSF if you lose capacity, so ensuring they have appropriate authority under your trust deed and superannuation law is essential.

Without this planning, the fund may be forced to restructure or in some cases be wound up. This could lead to substantial tax consequences, disruptions in investment management, and unintended outcomes for your superannuation.

8. Be Cautious In Blended Family Situations

If you have children from a previous relationship or a complex family structure, the control of your SMSF after your death can have significant implications.

The person who controls your SMSF, which is often the surviving spouse, may have the power to decide how your benefits are distributed if your documentation is not correct or is otherwise disputed.

In complex family arrangement, blended families, or if you otherwise anticipate a dispute, consider appointing an independent trustee or corporate trustee for your SMSF.

9. Seek Professional Advice To Avoid Costly Mistakes

Given the interplay between tax law, superannuation law, trust law and estate law, it’s essential to obtain legal advice, financial advice and taxation advice from reputable and experienced professionals.

Estate planning, particularly when it involves superannuation, trusts, companies or SMSFs, is rarely a one-size-fits-all process. Mistakes such as relying on outdated or DIY documents, misunderstanding the legal status of your superannuation or failing to align your intentions with the terms of your trust deed or company constitution can have serious and expensive consequences.

At RHC Solicitors, we will always work alongside your broader financial advisors, taxation specialist and accountants to provide holistic estate planning solution that reduces risk, aligns with your goals, and gives you confidence your affairs are in order.

We have extensive experience helping Queensland clients structure their estate plans with SMSFs in mind. Whether you're setting up a Binding Death Benefit Nomination, reviewing your trust deed, or updating your Will, we can guide you through the process with clarity and confidence. Get started today by scheduling your estate planning.

Disclaimer: This publication is not intended to be comprehensive, nor does it constitute legal advice. We are unable to ensure the information is current and there is no guarantee in relation to accuracy. You should seek legal or other professional advice before acting or relying on any of the content of this publication. The views and/or opinions expressed in this publication is that of the author and may not necessarily represent the views and/or opinions of RHC Solicitors.

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