Changing Trustee for SMSF

Is it possible to change the trustees of a smsf from individuals ie members to a corporate trustee or must you kill the fund and create a new one ?

 

Why do you want a corporate trustee - the only advantage I see is if you are likely to drop to a single member or you are employed by your own family company. There is plenty of statutory protection of a SMSF so there is no pressing need to interpose yet another entity.

Disadvantage is administration.

Either way it is simple to change trustees without affecting the fund - give the ATO a ring for the formalities for a SMSF.

Cheers,

Rob

 

A corporate trustee will allow me to add my kids later if I want however apparently the type of trustee affects how the super can be paid when it can be paid.

An individual trustee SMSF can only distribute the super as a pension, a corporate trustee smsf allows either a pension or lump sum.

Its a long ways orf (26 yrs).

Here is a link - read item 1.

Australian Superannuation Self Managed Superannuation Funds (SMSF ) - sow

 

That link is doing a hard sell on their product. Most Federal laws are on shaky constitutional ground - including Corporations Law which only lasts as long as the States don't spit the dummy. Hell, theoretically the Federal Government does not have the right to levy income tax - they stole it off the States during a war when nobody was looking !!

It looks like just another shelf company but with a tailored constitution for SMSF tasks.

Yes a corporate trustee can be easier when members come & go, especially if you drop to one member. It is also better if any member spends a long time abroad so the trust residency does not change.

BUT you have extra entities and miscellaneous ASIC fines for minor breaches of Corporations Law which they are so fond of. Also, all directors must be members and members directors. Liability issues are unlikely as an SMSF cannot trade or give security over its assets so the most likely people to sue are the members as beneficiaries !!

A corporate trustee takes some simplicity out of routine operation and needs a compelling reason in my view.

Cheers,

Rob

 

What ^ RobG said, plus read the Super fund Deed. Remeber that each member needs to be a Director of the coy, so don't use the coy for anything else.

 

My opinion regarding the choice of trustee is different.

I am totally for corporate trustees. Yes, you have to pay more to set them up ($400 to register a company with ASIC + cost of constitution etc) and you have to pay $40 per annum to keep them registered - but it is a small price to pay for the administration advantages alone.

Take the example of the standard mum and dad SMSF with individual trustees. Dad dies, and one of the children come in as the second trustee. Every single investment needs to be changed to account for the change of trustee. Trust me - when someone dies, the last thing the family needs to be worrying about it the mountain of paperwork and dealing with banks, fund managers and lawyers to do a simple trustee change. I have been there and it is a nightmare.

Also, what about all the people bring their kids into their SMSF? How many of them probably haven't even added the kids as trustees (or themselves as replacement trustees if the kids are under 18)? A corporate trustee gives total flexibility regarding the easy change of members, by simply adding or removing a director of the corporate trustee! You can do that online with ASIC in about 2 minutes.

Lets take this to the next level. There is currently just over a Trillion dollars in superannuation in Australia, with approximately a quarter of that in SMSFs. In the next 20-30 years there will be a massive inter-generational transfer of wealth. That is a hell of a lot of paperwork.

Also, regarding corporate trustees people need to be careful regarding the constitution (memorandum of articles / rules / replaceable rules) of their trustee company. The rules of the company should be in line with rules of the superannuation fund (i.e. the trust deed). This is especially important in regards to estate planning.

I feel very strongly about this topic. My opinion is based on experience. If I remember I will post a more detailed report regarding the choice of trustee. I simply want people to be aware of the facts so they can make an informed decision.

 

Good points MuperSan!

 

I tend to agree with superman. - much less hassle if someone leaves the fund or dies, but Rob is exactly right regarding the asset protection that automatically applies to a smsf.
NickM

 

I agree in the most part - the average SMSF holding shares, managed funds etc liability issues will almost never arise.

However, when the fund starts to invest in real property, it definitely opens the door to potential liability issues. Again - I stress that it would be quite rare - but not impossible.

 

OK - I am on my soap box again regarding this topic.

Here is a free report from regarding the choice of trustee of your SMSF View attachment 428

Honestly the case study is a little lame, however it does illustrate the point.

Dealing with government departments, especially State revenue offices and titles offices - even if you know what you are doing - is a nightmare.

I hope someone finds this useful.

SM

 

I'm also a fan of the corporate trustee.

Over the longer term, I'm sure it would be cheaper to pay someone to fix the names of trustees on all the investments, rather than pay for the cost of a company plus $40 per year (& whatever increases ASIC apply in future).

But, as a former accountant who looked after many many SMSF's (up until 2 weeks ago!!), I'm all for corporate trustees.

Reasons

- Simple to do any changes to members, just lodge the ASIC form rather than update every investment
- Vitally important on death of a member. Not much enjoyment out of getting the grieving widow to complete mountains of paperwork. And more often than not, it's not even considered at the time so ends up getting done months later, leaving the fund exposed to compliance issues.


With simpler super, no real issue anymore with pension vs lump sum powers, as you can start a pension with minimal paperwork and withdraw up to 100% in one year (assuming satisfied a cashing restriction, but if not can't access lump sums anyway)

Lastly, though, remember to check your trust deed. I don't know if Cleardocs are the only ones currently doing it, but its who we used for our deeds (& I used them for my own), and their deeds are written specifically for one or the other. If you want to change from individual to corporate, or vice versa, you'll need to update your trust deed if using a Cleardocs deed.

 

Reidy75 raises some excellent points.

Death of a member can be a real problem when you have individual trustees. A second trustee must be appointed almost immediately. This problem does not occur with a corporate trustee.

Regular review and maintenance of your trust deed is important to ensure it complies with what you want to do as a trustee.

Eg the new borrowing arrangements

Consider your SMSF is like a small child. It needs attention and make sure it is growing.
Nickm

 

I was reading through this old thread and I want to ask a question.

When using personal trustees, why would you need to change the name of the assets if a member dies?
a SMSF can have any name can it not?

so if I name my SMSF
JONES & JONES SUPERANNUATION FUND
and mr JONES dies but Mrs JONES is still around the name can stay the same and she can continue getting her pension.

I agree about the issue of appointing another trustee though and updating the deed docs but that shouldn't be too hard to do.

 

Yeah - you are correct (kinda) Billv.

If an asset is held in the name of the fund as per your example, you don't need to change anything in that respect.

Financial institutions and share registries normally require the name to be in the name of the trustees, with the fund as a designation or account name, so using your example it would be "Mr Jones and Mrs Jones ATF (as trustee for) Jones & Jones Superannuation Fund".

To keep it correct as per the legislation if Mr Jones dies, it would need to change to either "Jones Super Pty Ltd ATF Jones & Jones Superannuation Fund", or "Mrs Jones and Trustee #2 ATF Jones & Jones Superannuation Fund"

Either way it would need to change.

Not only death - what about divorce? Although, most SMSFs seem to die a painful death if the members get divorced.

 

Superman

Thanks, that does make sense.

I suppose the name change would become an issue when the mortgage is paid off because while the property is mortgaged the asset is still in the name of our bare trust (custodian trust) and the title docs are held by the lender.

 

Online change of trustee

I don't really know which is best yet. I'm still researching.

But given that you can change trustee at any old time for $137 at Cleardocs, I'm not too fussed about being locked in with one structure or another.

Mind you, I guess I should ask, has anyone had any dramas changing trustee?

 

Really? You read all the replies on this thread and still need to do more research? I think the information here should be enough for you to make your decision.

OK. That covers the deed of amendment to change the trustee - but what about updating titles, share registries, bank accounts, managed fund registries etc? If you put a Porsche badge on a Ford Falcon, it is still a Ford Falcon.

Yes. As per my previous posts.

 

Thanks, Superman

I’m glad I asked my question at the end about "dramas".

Also, I hope you don't mind if I make my decisions on information other than a thread on a website forum in which lots of the comments are from someone who says “l feel very strongly about this topic.”

The bit on the ATO website about lump sums etc. seemed important. Here it is:

"Your self managed superannuation fund will have either

• a corporate trustee, or
• individual trustees.

A corporate trustee is subject to the Corporations Act 2001.

Individual trustees are subject to regulation by the Commonwealth through the pension powers within the Constitution.

A fund that has a corporate trustee may pay benefits in the form of a lump sum or a pension.

A fund that has individual trustees must state in the trust deed that the fund was established for the sole or primary purpose of providing old aged pensions.

However this does not prevent the fund from paying lump sum benefits providing the trust deed allows for this."



I guess the "However ..." point at the end make it easier to go either way.

But as I am planning to have only a few commercial properties in the fund, the admin hassles you talk about aren't too much of an issue.

 

I suggest you seek professional advice.

Visit SPAA

Good luck with everything.