“I have a self-managed super fund set up to benefit the family. There’s just one problem: The rest of my family doesn’t want anything to do with it. What would happen to it when I die if my wife and I am the only ones in the trust, as compared to what would happen if the children signed up? What are the risks that we should consider?”
QUESTION:
I have a self-managed super fund set up to benefit the family. There’s just one problem: The rest of my family doesn’t want anything to do with it.
My wife doesn’t like to think about money. She would prefer to leave it in the bank, or invest in real estate. She certainly doesn’t like the idea of buying and selling shares, which is the basis of the super fund. My two adult children are too busy to contemplate becoming involved, or perhaps they are concerned about owning my debts and losing money on shares.
What is the best way to preserve my superannuation, to provide for my wife and two adult children after my death? How can I convince my children that it is in their interest to sign up to the family fund?
What would happen to it when I die if my wife and I am the only ones in the trust, as compared to what would happen if the children signed up? What are the risks that we should consider?
ANSWER:
It is important to remember that superannuation is a mechanism to support you during your retirement. It is not, in many cases, a mechanism for generational wealth accumulation.
For a superannuation fund to continue to exist it must have at least one member. Upon a member’s death, subject to certain other arrangements being in place at that time, that member’s superannuation account balance must be distributed by the trustee of the fund to that member’s superannuation dependent/s. This may mean certain assets of the fund will need to be disposed of by the trustee, even if your children were members of the fund, so that the trustee can pay out your account balance. If there are no members of the fund alive, it will come to an end.
This is a complex area and the panel strongly recommends you seek professional advice. Having done this you, your wife and children will hopefully have a greater appreciation of the benefits and traps of a self-managed super fund.
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Relationships Australia (SA) appoints panels of general practitioners, medical specialists, lawyers, therapeutic and financial counsellors to discuss each letter before the appropriate professional answers it.
