A self-managed superannuation fund doesn’t have an expiry date but will generally end when the primary trustees die, unless there are also children in the fund.
This is merely a function of Australia’s tax system, which requires most people to cash out their super in full once both members of a couple have died. When the fund has no assets, it should be wound up.
There are three main issues for trustees to consider.
Firstly, they need to think about how to replace or add a trustee if one member of the couple passes away. In this event, another person or company will need to be appointed.
Secondly, in the event that both members pass away, an executor will need to be appointed to wind up the fund. Similarly, an executor will need to be appointed to wind up the fund when the last person in the fund passes away.
Perhaps most importantly, trustees should prepare for the possibility of living for a long time and ultimately losing the ability to manage the fund alone, if at all.
Fortunately, the management of a self-managed fund can be outsourced to a third party and that person or company can be appointed as a trustee.
This is a big responsibility.
Exiting an APRA-regulated fund can be complicated too. Members still need a plan on what to do with each other’s super when one member of a couple dies or becomes incapacitated.
When the time comes, members will most likely be dealing with strangers, probably over the phone, rather than being able to brief an accountant or administrator that they have known for many years.
The superannuation will have to be withdrawn from the fund just as it would if it was in a self-managed fund.
This illustrates that there is no “zero risk” choice when it comes to superannuation. The Australian Securities and Investments Commission’s focus on SMSFs at the moment fails to balance the risks of being in a large APRA fund.
