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Understanding Estate Planning And SMSFs: What Makes Them Important?

Understanding Estate Planning and SMSFs: What Makes Them Important?

Author: Daniel Brown

Although it is common for people to put off estate planning, failing to do so might result in your assets being given to the wrong people—or even ending up in the hands of the government. That’s why it’s essential to focus on estate planning and SMSFs, which are designed to help you manage your assets properly even after you’re gone. Here’s a quick guide to help you understand:

What is Estate Planning?

Estate planning is the process of organising your financial affairs to ensure that your assets are dispersed as efficiently as possible to your designated beneficiaries after your death. A sound estate plan can assist in reducing the amount of tax your family and other beneficiaries pay when they inherit your assets after your death. It also helps ensure that your desires are carried out in the manner you intended.

A strong estate plan should be reviewed frequently as your circumstances or the circumstances of your family change over time. It also requires frequent verification to ensure that your beneficiaries are still qualified to collect your superannuation death benefits.

Creating a Will is the first step in the process of arranging for your estate. A Will guarantees that your wishes for your savings, investments, and the distribution of your assets after your death, are carried out accordingly. However, it doesn’t ensure what happens to your superannuation or SMSF.

SMSF Estate Planning: Issues to Remember

There are numerous significant concerns to consider if you hold your super benefit in an SMSF:

Control of Your SMSF

Who controls the fund at the time of your death determines what happens to your superannuation payout and SMSF assets. Because your retirement fund is not part of your estate, the trustees can act in the fund’s best interest without your input. 

Trustees may sell assets you hoped to maintain in your SMSF but couldn’t due to unforeseen circumstances. Due to SMSF trustees disregarding a dead member’s wishes, selected beneficiaries (children and spouses) have been denied substantial recompense.

Your Will and Your Super Benefit

Many people believe that having a Will takes care of the distribution of their superannuation death benefit. However, they don’t realise that even if you have super in a self-managed fund, your superannuation does not instantly become part of your estate.

This is because your super is held in a trust rather than directly owned by you.

The SMSF trustee decides who gets your death benefits. Your Will cannot direct the trustee to make a specific payment to a particular person.

Death Benefits and Your SMSF

A binding death benefit nomination (BDBN) is required in addition to a Will to ensure that your estate wishes are entirely carried out. 

With no BDBN, your SMSF trustees can choose to pay your death benefits outright to an estate rather than to your spouse, children, or other financial dependents. A BDBN must be valid and completed by the fund’s trust deed to be accurate.

Your SMSF Trust Deed

A valid SMSF trust deed is necessary for effective estate planning. The trust deed must be regularly revised to keep up with any recent and future statutory changes.

A proper trust deed should empower trustees to carry out their estate planning goals, such as providing a regular income stream to beneficiaries. A customised trust deed can restrict death benefit disbursements, control, and beneficiaries.

Tax and Your Death Benefits

The super law restricts who can receive your death benefit and whether it is a flat sum or an ongoing source of income.

Although your SMSF can pay your super death benefit to both dependents and non-dependents, the tax implications vary depending on the beneficiary’s status.

Reversionary Pensions

Choosing an irrevocable reversionary beneficiary for your superannuation might simplify estate planning. A reversionary pension allows your beneficiary to receive your super immediately.

Building reversionary pensions to provide recurrent income for multiple recipients is especially useful when protecting vulnerable or minor beneficiaries.

Additional SMSFs

Creating a second SMSF for your spouse may be beneficial if you anticipate your relatives contesting your estate planning decisions. Having two SMSFs keeps your financial interests separate from your children’s and spouse’s, which can help you plan to distribute your superannuation death benefits.


Testamentary and family trusts work well with SMSFs. They can also be used as a supplementary investment vehicle once you’ve hit your $1.6 million transfer balance cap (up to $1.7 million on July 1, 2021). Trusts, especially those involving minors, can be exceedingly tax-efficient for intergenerational wealth transfers.

Know What Matters, Speak With the Experts! 

The tendency for people to put off preparing what will happen to their money is understandable; nevertheless, failing to do so may result in your assets being given to the wrong people—or even ending up in government hands—if you do not plan.

Sydney Wealth Advisers  offers you a team of financial consultants who ensure that you have access to a suitable and customised investment strategy for your situation. Book a consultation today!


DISCLAIMER: The views expressed in this publication are solely those of the author; they are not reflective or indicative of RI Advice Group’s position and are not to be attributed to RI Advice Group. They cannot be reproduced in any form without the express written consent of the author. This information (including taxation) is general in nature and does not consider your individual circumstances or needs. Do not act until you seek professional advice. Newcastle Financial Planning Group, Central Coast Financial Planning Group, Sydney Wealth Advisers, Coastal Advice Port Macquarie and Coastal Advice Ballina Byron are subsidiaries of Coastal Advice Group Pty Ltd which is a Corporate Authorised Representative of RI Advice Group Pty Ltd, ABN 23 001 774 125 AFSL 238429.
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