The structure of a self managed superannuation fund (SMSF) is often based on a family unit. A very common SMSF structure is, for example, two spouses as the members and trustees/directors of the corporate trustee.
This structure can work well, particularly in circumstances where it is structured as part of the broader family group. For example, the SMSF might hold a number of items of real estate, one of which is a commercial property, which it in turn rents to an entity which runs the family business. In this way, the rent is paid into the family SMSF to provide for the members’ retirement, rather than to a third party.
However, such a structure can present some unique challenges in circumstances where a member of the SMSF has to exit the SMSF, either through a relationship breakdown or death. The process is not as straightforward as in, say, an APRA regulated super fund, where investments are liquid and benefits can easily be rolled over to another super fund or paid out as a death benefit.
In this paper we will cover a number of these unique challenges, and options for dealing with these issues (or even better, preventing them from arising in the first place).
Please note, in relation to the divorce aspect, this is not a paper on super splitting. The super splitting rules are complex and are a presentation in themselves. We have opted to instead discuss the issues which are unique to exiting a member, and their benefits, from an SMSF, in circumstances of divorce or the death of a member.
This paper will cover:
Options and procedural requirements for exiting a member on divorce;
Liquidity issues and in specie transfers from SMSFs in the context of death and divorce;
Key steps on death of a member, including super law requirements and practical considerations;
Tax considerations in relation to payment of death benefits.
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