Self managed super fund death of a member

This is an area of expertise that sets Merthyr Law apart from other law firms. Death of a member When a self-managed super fund ( SMSF ) member dies , the SMSF generally pays a death benefit to a dependant or other beneficiary of the deceased. What is a super fund member? If the recipient is a dependant of the deceased , the death benefit can be paid as a lump sum or income stream.

The difference between an SMSF and other types of funds is that the members of an SMSF are usually also the trustees.

This means the members of the SMSF run it for their benefit and are responsible for complying with the super and tax laws. Effect of death of the deceased’s super funds pension When a self-managed super fund is paying out a pension to a member , the assets supporting that pension are tax free. Self - managed super funds. So if a member balance consists of cash and shares, the interest and dividends on those assets are not taxed.

This also applies to any capital gains on asset sales. Compulsory payment upon death of a member First, death is a compulsory payment situation. It means the deceased’s super cannot remain in their SMSF.

It must be paid either to their dependants or their legal personal representative “as soon as practicable”.

A self-managed super fund is a special type of trust that is set up specifically for saving for your retirement that complies with the superannuation laws. I recently attended a seminar at which Peter Pascoe, barrister, shared a paper on this very topic. Since more and more people and using self managed superannuation funds (SMSFs) as investment and retirement vehicles, this information is very relevant. Then communicate the situation with your self - managed super fund auditor as soon as possible. How to minimise the risk of non-compliance.

The risk of having your fund become non-compliant following the death of a member can be avoided by structuring your SMSF with a corporate trustee. This can save time, money and heartache. There is a general rule in regulation 6. In addition, subregulation 6. When an SMSF member trustee dies, below are the courses of action: 1. The surviving member trustee must pay the balance of the deceased member trustee to the nominated beneficiary within six months from date of death. If the nominated beneficiary is a dependent (ie spouse or child), the payment is tax free on the hands of the beneficiary. If a self managed superannuation fund (SMSF) member dies and they have a reversionary pension and a death benefit agreement or nomination, which takes priority?

As part of the estate planning process a question is often asked about whether to adopt a binding death benefit nomination for a member. Ultimately whether a binding nomination is appropriate or not can only be determined by the member ’s individual circumstances. A large proportion of those members are members of a two-person SMSF (usually, a husband and wife or de facto partners).

Your self - managed super fund (SMSF), unlike your home, is not something that will likely automatically be passed on to your family members. Your trustee (as chosen by you) will pay a death benefit to your nominated parties as per the governing rules of your fund and in conjunction with legal requirements. So, what is a death benefit nomination?

The most common problem we see across self - managed super funds is that the structure is usually setup under a husband and wife arrangement such as “John and Mary Smith ATF The Smith Super Fund ”. This appears perfectly normal on face value (it is known as the “individual trustee” structure), but it can produce an enormous mess upon death. The self managed super fund will cease and therefore should be wound up within months, unless an APRA approved Regulated Superannuation Entity is appointed. If you lose capacity, hopefully you have executed an enduring power of attorney and appointed someone.

With regard to the financial management of the super fund , while a pension may cease because a member has died the operation of the fund must continue under the direction of any remaining trustee. In some cases, it may be paid to a non-dependant. A death benefit is a payment made from a super fund on the death of a member. Our comprehensive set of documents includes. SMSF Life Insurance Cover is suitable for trustees of self managed superannuation funds to consider for members of the fund.

SMSF Life is life insurance cover which pays a lump sum benefit on the death or Terminal Illness of an insured member. The tax treatment of death benefits paid from an SMSF to a deceased member ’s estate can be complex. Tax law contains a ‘look through’ provision in respect of death benefits paid to an estate (ie, to a legal personal representative being the executor of a will or the administrator in the case of intestacy).