Your Children in your SMSF
The average Australian SMSF has 1.8 members, less than 10% of these have more than 2 members within the fund. This in term collates with other research, suggesting that SMSFs, are now becoming the 'Mum and Dad Fund'. Over the past decade, we have seen an increase in the diversification of different age groups amongst SMSF members. According to ATO statistics, it has been suggested that the child members have been entering into Mum and Dad's SMSF.
So, what are the pros and cons of including a child member in your SMSF?
- There is more money within the SMSF in order to invest in a diverse range of assets
- You get to invest, grown and make a profit as a family
- The kids can take an active trustee role
- As parents, you will have the opportunity to keep an eye on the kids superannuation savings
- The kids can obtain long term tax benefits
- In many cases, it is cheaper to aggregate all superannuation, providing an overall total fee saving
- As parents, you have the option to self insure the children in event of temporary to total and permanent disability
- You may decided that you would like the assist in boosting the kids balances with co-contributions
- You will be EDUCATING your children in the importance of planning, saving and investing
- You may lose control over the decision making of the fund (the result of equal voting rights per member)
- In an SMSF, there is a limitation of a maximum of 4 member, thus, you are limited to; Mum, Dad and 2 child member/s
- The Fund will be more complex to administer , given the different stages and circumstances of each member
- There is the possibility of it become very messy when dealing with estate plans
- You might not want your kids to know how much is in the fund or how much money you have available
In reality, there has never been any rules or legislation not allowing children members to join the fund, it is up to you! However, there are things to consider such as; how many child member/s you would want to include, where they live, their age, the earning or income, disabilities and many others. It is also important to think about the future, when you are not here, what plans do you have in place?
It is crucial that you seek professional advice before any action is taken. SMSFs offer great incentives and benefits to members, however, do have quite technical legal obligations and implantations that must be considered when change the SMSF structure particularly introducing a child member.
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