Liquidity needed to deal with lumpy assets
Self Managed Superannuation Fund (SMSF) trustees need to be conscious of lumpy assets such as property within their fund portfolios in the event of death.
That is the assessment of specialist SMSF company, Topdocs, which has drawn on evidence collated from over 600 accounting, financial planning and legal firms.
Topdocs national manager, training and advice, Michael Harkin said feedback the company had received from the industry suggested that while SMSF trustees were quick to calculate the gains which would flow from real estate investments, they failed to appropriately factor in what happens to the asset in the event of a fund member dying.
He said that trustees tended to overlook consequences such as the fire sale of a property and beneficiaries being liable for hefty death benefits and capital gains liabilities.
Harkin said one of the best mechanisms for dealing with such a problem is to retain the property where possible in the SMSF and to build up liquidity to cover benefit payments and lower the impact of tax.
He said trustees should consider operating a reserve in the SMSF, taking out life insurance for fund members, using cash held in the SMF to reduce potential death benefits tax and encouraging adult children to become SMSF members.
Recommended for you
Data and technology provider Novigi has acquired Iress’ superannuation consulting and managed services business from Apex Group.
AMP is to launch a digital advice service to provide retirement advice to members of its AMP Super Fund, in partnership with Bravura Solutions.
Unveiling its performance for the calendar year 2024, AMP has noted a “careful” investment in bitcoin futures proved beneficial for its superannuation members.
SuperRatings has shared the median estimated return for balanced superannuation funds for the calendar year 2024, finding the year achieved “strong and consistent positive” returns.
