Have an exit plan in place for when it all gets too much

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SMSF trustees should put as much energy into future fund management planning as they do into the size of their superannuation balance, the head of William Buck’s wealth advisory focus group urges.
 
"The first wave of SMSF trustees are moving into their 80s. Until now, the focus for many SMSF trustees has been on growing their fund to ensure they have the amount of money they need for a comfortable retirement,” says Chris Kennedy.
 
“Much less thought is given to how they’re going to manage their fund as they age, or how they’re going to exit when the time comes.”
 
SMSFs are the fastest growing area of superannuation with almost $500 billion in funds under management and half a million trustees. Recent statistics from the Australian Tax Office show more than a quarter of these trustees are aged 65 and over.
 
But not to create a management succession plan may put retirees’ hard-earned savings at risk, Kennedy says.
 
“Given SMSFs have not been in the market for the length of time that other superannuation vehicles have, it’s a unique situation where you have an ageing segment managing vast amounts of money and having to make major investment decisions.
 
“There’s no doubt that as people get older, they’re certainly less interested in their trustee responsibilities and in an increasing number of cases, less capable of carrying out these responsibilities because of deteriorating mental health.”
 
Kennedy pointed to statistics from the Commonwealth Department of Health which shows almost 1 in 10 people aged 65 and over had dementia, with that figure projected to rise in future with the aging population.
 
So in order to protect against unplanned intellectual impairment or simply a loss of interest in managing such large amounts of money, Kennedy urges SMSF trustees to put in place an exit or succession strategy.
 
“There are a range of options for trustees who no longer want to run a SMSF, but the important point is they need to give some thought to what they want while they have the ability and the motivation to do so,” he says.
 
“Trustees may want to hand back the decision making responsibility for their fund by reverting back to a retail fund or wrap platform, or alternatively hand over to a professional corporate trustee.
 
“They may also opt to appoint a power of attorney to step in and manage the fund in the case they’re not able to.
 
“The most important thing is for trustees to put some time and effort into the path they want to take before it’s too late.”
 
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