High Voltage SMSF Strategies
For the thing that is most important to us all – Family
Ove the decades I have asked SMSF Trustees at my presentations the following question up front:
“What is important to you in your life right now?”
And 98% of the time guess what was consistently in the top three ranked answers. Gosh I am sounding like Family Feud here.
Anyway, it is “Family!” And by family, it is looking after them financially, spending time with them, enjoying their company.
So where am I going with this. Well in your hands you have a miraculous tool that can not only be built and structured to look after the family but have as its fundamental core, the Family. So much so that I have discussed this evolution and revolution of SMSFs in my latest book “The Guru’s Guide to SMSFs” where I cover extensively the Family SMSF aka the Family Super Fund.
It is different from the single member focus of a retail and industry fund and the investment control theme of a SMSF. It is Family first and Family built. So why is Family SMSF important to advisers and Trustees now?
Well two seemingly innocuous changes that have been made to the super rules usher in a new era of longevity, family, tax and estate planning in SMSFs.
The first one and certainly one that has gone unnoticed for ten years was the simple amendment in 2007 to SIS Regulation 6.21 to enable a super account to remain in accumulation until the member’s death. So, no pension, no forced lump sum withdrawals – just long terms wealth creation until its Passed on until the member dies. Think about it. A 70 year old SMSF member has a Family Trust with $3m in assets, limited tax effective beneficiaries, enough income to live on from the Trust and $2M in their super fund.
Would you set up a pension or hold the super assets in the Fund?
The second arose in 2017 when a Personal Transfer Balance Limit which limits the amount of super benefits a member may use to establish a pension. Any excess must remain in the member’s accumulation account. Think about it. A 65 year old client has $2.5M in their accumulation account in their SMSF, are frugal and only want $40,000 per annum to live on.
How much should they transfer to their pension account to nail their income requirements and what should stay in their accumulation account?
And with these accumulation accounts what should we do with them. That’s where the High Voltage part comes in with estate planning being a prime candidate but there are so many more family applications and strategies. Can you think of any?
Now I could think of ten more cases that are in the same vein and I know there are thousands if not tens of thousands and possibly, a hundred thousand funds that need to be given a High Voltage shock.