When selecting a trustee for your Self Managed Super Fund (SMSF) there are two choices:
1) Individual trustees (typically husband and wife); or
2) A corporate trustee (eg XYZ Pty Ltd).
Individual trustees are slightly more cost effective. However, a corporate trustee can provide additional flexibility and estate planning benefits.
Estate Planning & Control
A SMSF requires a minimum of two individual trustees. On the other hand a corporate trustee can be controlled by a single director eg on death of a spouse.
With individual trustees, if one trustee becomes incapacitated or passes away a second individual trustee will need to be introduced (i.e. another family member or third party).
This can raise potential issues:
– The SMSF may have been established for the benefit of a husband and wife only. On death of one trustee, another trustee eg one of your children needs to be added giving them a say in how you invest your money. This may not be desirable.
– The legal ownership of all assets in the SMSF must be updated to include the name of the new trustee in a short period after death. This is can be an administrative headache at a tough time.
– Who controls the SMSF on death of the last member spouse? This is an important issue that requires careful planning. There are many legal cases around this issue. If you have more than one child and they are not all trustees they could in some circumstances legally pay all proceeds to themselves.
Cost of a Corporate Trustee
The initial cost of setting up a corporate trustee is typically in the order of $600 + GST and an annual ASIC fee of $45 per annum if the company is set up as a sole purpose trustee company. There is no fee for individual trustees.
If you have any concerns or wish to discuss your SMSF trustee situation further please contact us. The trustees of SMSFs are subject to many and various legal obligations and professional advice is almost a necessity.
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