SMSF Succession Planning for Advisers
In this article, Dan Butler & Nathan Papson from DBA Lawyers considers the recent release of the ATO’s controversial draft ruling regarding auto-reversionary pensions (TR 2011/D3).
This draft ruling highlights the awareness of effective succession planning and provides an opportunity for advisers to review their current succession planning practices.
More often than not, advisers will be approached with the query ‘I’d like to update Mr X’s pensions to make them reversionary’, or ‘Mrs Y needs a BDBN drafted’. However, in order to appropriately plan for Mr X and Mrs Y’s SMSF succession upon their death or loss of capacity, there a number of things that must be considered.
Many Succession Planning Considerations
Firstly, the SMSF’s deed will need to allow other supporting documentation to be put into place. The SMSF members should consider having a sole purpose corporate trustee appointed, with mechanisms in the company constitution that allow for the smooth succession of directors.
Thereafter, things such as wills, enduring powers of attorney, pension documentation and BDBNs should all be reviewed and considered. They should be checked to ensure that they are consistent with one another and are in accordance with their clients’ goals.
Comprehensive Succession Planning
When an adviser’s client asks them to start a pension or BDBN, the adviser should be thinking about a range of other aspects. The reversionary nomination is now an important decision and has an impact on clients’ estate planning — it affects every pension.
Advisers should be able to formulate strategies that can be applied across all of their clients that ensure:
Handy Checklist for Advisers
Click here to open a handy SMSF Succession Planning Checklist that can used as a general guide to assist advisers with a range of SMSF succession queries that their clients may have.
The first question in the checklist is arguably the most important. Once a client has decided where they wish their death benefits to be paid, then consideration can be given to the other questions in the table.
Advisers should urgently review all clients with pensions following the release of TR 2011/D3 to see if they are exposed by not having an auto reversionary pension. Typically, a conversion to an auto-reversionary pension will not address all of that client's succession plannning needs.
By utilising the material outlined above, advisers should be able to design a comprehensive review that will benefit all their client's interests.
This article has been prepared by DBA Lawyers, specialist advisers on SMSF and estate planning matters and, in addition to SMSF deeds that cater for succession, prepare wills and EPOAs.
This article is general information only and should not be relied upon with first seeking advice from an appropriately qualified professional.