Advisers performing estate planning services for self-managed superannuation fund (SMSF) clients need to include one critical clause when preparing the fund’s will, according to SMSF Strategies principal Grant Abbott.
“One of the most important clauses in an SMSF will for an adviser’s business is to put themselves or their firm in as the overseer of the SMSF estate. That’s not the administrator of the will; it’s the person that is going to look after the workings of the SMSF estate,” Abbott told attendees at the SMSF Strategy Day in Adelaide yesterday.
“And why shouldn’t they, because usually the adviser has helped set the whole thing up.
“The adviser can then go further and set down a schedule of fees associated with the administration duties. Generally this is set at about 2 per cent.”
By taking this course of action the adviser will better insure a continued income stream. This will happen even in the event the remaining trustees of the fund dismiss the adviser from the operation of the SMSF estate as a payout is still legally guaranteed under section 55(3) of the Superannuation Industry (Supervision) Act.
“When advisers do these things, like setting up pensions, and when there is the switch over, they need to guarantee their future income stream because if they’re setting it up, they’re the best person to manifest what’s going on,” Abbott said.
In regard to setting up pensions for SMSF trustees, he pointed out there was a real problem in advisers’ standard practices.
“One of the weaknesses is that pensions are written to simply one person,” he said.
It meant in the event of the death of the pension member, the adviser and the remaining trustees would have to refer back to the SMSF’s trust deed to establish the future course of action, he said.
In that event, if the trust deed had not been drafted to sufficiently deal with those situations, the SMSF could face significant harm, such as incurring unwanted tax liabilities, he said.
