There is roughly 900,000 in my SMSF. We are in our early 70s. Can I use 300,000 to set up trusts for 3 grandchildren locked up till they are 30 years old. We are not on any government subsidy. Thank You
Brian from Sydney
Top answer provided by:
Shane Black
Hi Brian! First of all, you should be commended for wanting to give your grandchildren a helping hand in life.
Technically, you could use the funds from your SMSF to establish trusts for your grandchildren. Since you’re over 65, there are no restrictions as to how you can access your superannuation savings. You could withdraw the funds, establish a trust (or multiple trusts), and have it stipulated in the trust deed that your grandchildren are not able to access a lump sum until they attain the age of 30.
Alternatively, you could consider testamentary trusts. This is a special type of trust that is established upon your passing. The proceeds from your SMSF could be paid to your estate, who would then arrange the establishment of a testamentary trust. Now, since you have 3 grandchildren, it would be worth considering whether establishing multiple testamentary trusts is a good idea. By the time your grandchildren are 30, they are likely to have separately carved out their own families, careers and lifestyle. To reduce the likelihood of any disputes within a single trust, you may want to segregate your grandchildren’s funds across separate testamentary trusts.
Any specific instructions that you have about the operation of the trust (e.g. no lump sum withdrawals until your grandchildren attain the age of 30) should be documented in the trust deed.
Either way, we’re talking about a significant sum of money for each of your grandchildren so it would be a great idea for you to discuss your individual circumstances with a specialist estate planning solicitor. They will be able to guide you through how any trusts can be used in your overall estate planning strategy.
It’s also a good idea to speak to an accountant because depending on which option you decide to implement, as there may be some rules that the trust will need to abide by. For example, you may need to distribute any income earned by the trust, otherwise you may be faced with some undesirable tax consequences.
To summarise, trusts can be complex structures to implement so make sure that you’ve got the right professional team to help guide you.
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Comments2
"You would possibly be eligible for Centrelink Age Pension payments after 5 years from establishing the trusts. To negate the tax position on the trust(s) you could use Investment Bonds within separate trusts for each of the 3 grandchildren with their parents as trustees or corporate trustees. Generation Life establishes the trusts for free with investment in their Bonds."
Byron Littlewood 17:00 on 05 Oct 18
"Another thing to consider is whether or not your grandchildren will be in marriages or relationships that may end up in divorce/seperation. I am sure that you would not like to see your generous gift be part of a divorce settlement. My advice would be to seek further, personalised advice on how to avoid this."
Julie 16:48 on 05 Oct 18