SMSF and estate planning considerations

SMSFs require coordinated estate planning across the SMSF deed, member binding death benefit nominations, the SMSF’s corporate trustee structure, member wills, and family relationships. Failure to coordinate creates outcomes that surprise families and incur unnecessary tax.

Trustee succession

SMSFs typically use a corporate trustee. On a member’s death, the surviving members continue as directors of the corporate trustee. If the deceased was a sole director (sole-member SMSF), an executor or family member must be appointed quickly to keep the fund compliant.

BDBN under the SMSF deed

The SMSF deed governs whether and how BDBNs operate. Some older deeds don’t permit binding nominations. Updating the deed to allow modern BDBN drafting is often the first step.

Reversionary pensions

A reversionary pension automatically continues to a nominated reversionary on the member’s death. For couples, this is often the simplest, most tax-efficient outcome – no need for a BDBN, no estate complications.

Tax-effective structures

Strategies like recontribution (withdrawing then re-contributing to convert taxable components to tax-free) can reduce the tax-bearing portion of super before death. Best implemented years before, not at the last minute.

Coordination with the will

The will and SMSF documents must align. A will that purports to bequeath super won’t override a BDBN. A BDBN that conflicts with the will creates ambiguity. Sam coordinates these documents with the SMSF accountant.

Summary

SMSFs add layers of complexity to estate planning. Here’s what owners need to address before the unexpected.

Talk to Sam about your situation

If this article raised questions for your own circumstances, Sam Michele offers free 20-minute initial consultations. Learn more about our wills service, or book a consultation.

Related reading

• Superannuation and your estate plan
• Binding death benefit nominations
• Wills service