Dealing with the death of a SMSF member is inevitable and often a complicated process. It’s crucial that the situation is dealt with in a practical and professional manner. Read below to see what steps are taken after a SMSF member dies:
Step 1
Members death sparks a course of action by the adviser and the trustee
A. Obtain notification and note from the trustee that the member is dead.
B. Advice to be sought dependent upon any formal requests in the binding death nomination SMSF will or conditional pension.
Step 2
Document Review – Linked to the members
A. Review the SMSF trust deed.
B. Check that the lineage and any change of trustee documents are correct.
C. Review the BDBN, SMSF will and any pension documentation.
Step 3
Trustee/Director appointment
A. What do the trust deed or the trustee constitution require for SMSF replacements?
B. What voting powers apply to the existing trustees and replacement trustee/director?
C. What is the adviser’s position?
D. Notify the regulators.
Step 4
Fund/member insurances
A. Review any fund/member insurance.
B. Contact life broker to accelerate insurance payout.
C. Determine insurance distribution policy.
Step 5
Determine member death benefits
A. Calculate death benefits in line with the trust deed- BDBN or SMSF will.
B. Are there any reserve payments?
C. Value assets used to pay death benefits.
Step 6
Auto-reversionary pensions
A. What does the deed state regarding the transfer of the pension?
B. Review of pension documentation for the compliance and transfer of pensions account.
Step 7
Set-up payment schedules
A. Be careful as the SIS Act requires that once the payment is made the replacement trustee must step down.
B. Review who is to get what payment-lump sum or income stream and are there any in-specie payments?
Step 8
Retirement of replacement trustee
A. The laws require the retirement of the replacement trustee/director.
B. Ensure new members become trustee/director unless incapacitated.
Step 9
Ongoing payout of pensions
A. What are the continuing pension requirements?
B. Is there a SMSF guardian in place to protect further reversionaries
down the line?
We’re Australia’s most trusted independent SMSF auditor. Please contact us if you would like further advice on this issue.
Source: Abbott, G. 2017, ‘Complications with death’, selfmanagedsuper, Issue 019, pp. 47.
David Saul | SaulSMSF | 1300 551 261
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