As is well understood, a complying SMSF must have all individual trustees as members and vice versa.
Where an individual member dies the superannuation legislation allows 6 months for an SMSF to ensure compliance. Often, for funds that are established as 2 member funds, this is achieved via the appointment of a corporate trustee, with the remaining member as the sole director.
The superannuation rules also allow a grace period for non-compliance from the date of death until just before the death benefits commence to be paid, where the legal personal representative (LPR) can act as the replacement trustee.
Most modern SMSF trust deeds reflect the superannuation legislation and have a discretionary provision that automatically appoints the LPR as the trustee on the death of the member.
While there can be confusion about the way the rules work, the conservative position is that the 6 month grace period starts on the death of the member. Therefore, regardless of when the death benefit commences to be paid, the trusteeship must be valid no later than 6 months following the date of a member’s death.
Practically, as set out in earlier posts, these rules further highlight the benefits of having a corporate, as opposed to individual, trustee.
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** For the trainspotters, the title of today's post is riffed from the Godfathers song 'Birth, School, Work, Death'.
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