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What is a Family Superannuation Fund?
Why Should You Have A Family Super Fund?
There are more than 610,000 self-managed superannuation funds (SMSFs) operating in Australia controlling over $900 billion in assets and this number is continually growing. The majority of these self managed funds have been established for one reason only and that is to enable members of the fund to control the investment of their superannuation monies and prepare for retirement. We believe this to be a short term concept for what could be a long term investment vehicle designed to look after the needs of your family for generations. As The Self-Managed Super Specialists, we can assist with SMSF strategies to grow your fund and establish a “Family Superannuation Fund”. EMAIL US TODAY FOR FURTHER INFORMATION ABOUT FAMILY SMSFs
What is a “Family Superannuation Fund”?
A Family Superannuation Fund builds on the foundations of an SMSF. However, unlike an SMSF which would generally provide for your retirement savings, a Family Superannuation Fund consolidates your family’s wealth into a single investment vehicle which can facilitate the intergenerational transfer of wealth. Think of it as a modern day family trust.
Self-Insurance and Incapacity
What would you do if you or your child was in an accident and incapacitated?
A Family Superannuation Fund can create a self-insurance policy to cover your family in the case of an accident or death. It can even provide cover for those who may not be able to obtain insurance. The Family Superannuation Fund can help to pay a benefit to the affected member to assist with their needs. All expenses can be paid out of the earnings of the fund and are tax deductible to the fund.
Continuous Documentation
All strategies for self-insurance and estate planning with a Family Superannuation Fund need to be well documented and implemented. It is vital to ensure all strategies are constantly monitored by a specialist in Family Superannuation Funds.
The Role of Self-Managed Super Funds in Family Financial Planning: An In-depth Analysis
As families across Australia strategise their financial futures, one tool growing in popularity is the Self-Managed Super Fund (SMSF). An SMSF not only provides a mechanism to secure a comfortable retirement but can also serve as a versatile tool for comprehensive family financial planning. This article explores how an SMSF can help a family, delving into the specific advantages it provides.
What is a Self-Managed Super Fund (SMSF)?
An SMSF is a private superannuation fund regulated by the Australian Taxation Office (ATO), designed to help individuals accumulate and manage their retirement savings. An SMSF differs from traditional super funds in that its members also serve as its trustees, granting them direct control over the fund’s investment decisions. A single SMSF can include up to six members, often making it a favourable option for family members wishing to consolidate their super assets.
The Family Advantages of an SMSF
1. Consolidation of Super Assets
An SMSF allows up to six members to combine their super balances into one fund. This can reduce costs through shared fund expenses and offer increased purchasing power for significant investments, like property. Consolidation also simplifies the management and monitoring of the family’s overall superannuation assets.
2. Customised Investment Strategy
With an SMSF, your family can tailor the fund’s investment strategy to align with your shared goals and risk appetite. This could mean investing in assets that offer capital growth for younger members while focusing on income-producing assets for those nearing retirement.
3. Estate Planning
SMSFs offer greater flexibility in estate planning compared to other super funds. Trustees can establish binding death benefit nominations that do not lapse, providing more certainty about how benefits will be distributed upon a member’s death. This can be a crucial advantage in blended families, ensuring the member’s intentions are fulfilled.
By establishing a Family Superannuation Fund, benefits can be passed down from generation to generation, within the same fund.
Once your children start their own families, new Family Superannuation Funds can be established from the existing Family Superannuation Fund and be tailored to the needs of the siblings. This can ensure all family benefits and assets are held for the benefit of future generations.
For blended and split families, multiple Family Superannuation Funds can assist with splitting benefits between children, while still controlling and continuing to assist in growing the fund for their current and future needs.
Thus, family superannuation funds can provide protection from divorce, bankruptcy and claims against a deceased estate.
4. Borrowing to invest
Sophisticated strategies such as borrowing within a Family Superannuation Fund can allow you to safely borrow to acquire certain assets with the protection of predictable cash flows from contributions, thereby reducing the risks normally associated with borrowing to invest.
5. Family Business Benefits
For family-owned businesses, an SMSF can purchase ‘business real property’ (commercial property), which can be leased back to the family business at a market rate. This provides potential tax benefits and aids in keeping business property within the family.
Frequently Asked Questions
Q: Can family members of different ages join the same SMSF?
A: Yes, an SMSF can include family members of different ages. This can be a strategic advantage as the investment strategy can be tailored to accommodate different life stages and financial goals.
Q: Are there any downsides to having a family SMSF?
A: While there are many advantages to a family SMSF, there can also be challenges. These may include differences in investment strategies, conflicts of interest, or family disputes affecting the fund’s management. Proper planning and clear communication are vital to avoid these potential issues.
Q: What happens to the SMSF if a family member/trustee dies?
A: The SMSF continues to operate after the death of a member. The remaining trustees will manage the fund, and the deceased member’s superannuation benefits will be distributed according to their death benefit nominations or the fund’s trust deed.
Q: Can an SMSF help in reducing taxes?
A: SMSFs can provide tax advantages, including the ability to offset investment income against tax deductions and concessional tax rates for income in the pension phase. However, tax rules can be complex, so professional advice is recommended.
Conclusion
A Self-Managed Super Fund can be an effective tool for families looking to gain control over their superannuation, providing opportunities for asset consolidation, tailored investment strategies, efficient estate planning, and potential tax benefits. However, the advantages should be weighed against the responsibilities and potential risks of running an SMSF. Therefore, professional advice should be sought to ensure an SMSF aligns with your family’s financial goals and capabilities.