A Leading Member SMSF is not the same as a Bloodline Trust, which is only for Estate Planning. A Leading Member SMSF guides the whole operation and management of the SMSF.
Absolutely! Particularly to ensure that the Executor is put in place on the SMSF trustee company on death. Without that the other directors may decline to appoint the Executor and take any nomination or BDBN into their own hands, including declaring it invalid.
A better solution is the Leading Member SMSF where one member is designated Leading Member. They have power to appoint and remove trustees and members and ensure that all death benefits go to bloodline. That position, which is Chairman of the Board of the SMSF trustees goes to the next leading member on death. Further, to make things extra secure the shares in the SMSF trustee company which should be owned only by the Leading Member are cancelled and then new shares issued to the next Leading Member. The share switch provides extra security over the Successor Director solution which at minimum is a must.
In terms of the Successor Director, there is no need to notify ASIC until the director is appointed as at that time the other will be removed.
The Commissioner of Taxation suggests that a Corporate Trustee be used, as it is a requirement for all assets to be in the Trustee’s name. Where a Trustee resigns, moves fund, dies or becomes incapacitated then all asset registers must change. This is not the case with a Corporate Trustee. But not all Corporate Trustees are the same. Our SMSF Corporate Trustee docs provide measures that spring into action in the event a member dies and ensure their executor is appointed as a director of the Corporate Trustee to manage the deceased member’s affairs.
The Leading Member does have a lot of control and this is a risk for all members. If any member is concerned they should leave the Fund or if the Trustee of the Fund is concerned upgrade the deed to the normal SMSF trust deed rather than the Leading Member SMSF, it still has all the strategies just not the control.
No. A corporate power of attorney enables a person or a company to act on behalf of a company, making decisions, taking control of operations etc. In terms of a trustee company of a superannuation fund the trustee cannot delegate their powers under section 59 of the Superannuation Industry Supervisions Act 1993. The penalties are significant for such a breach.
On the other hand, section 17A(3) enables a member’s enduring power of attorney to act as a trustee or director of the corporate trusts of the Fund should the member no longer be able.
Investment decision are generally made by a Trustee however the superannuation laws and our normal SMSF Trust Deed and Leading Member SMSF Trust Deed provides a member with the ability to run their own sub-fund. This means they have the ability to make their own investments, provided they do not impinge on other members benefits in the Fund.
The Protector – as a special purpose trust would this result in land tax being payable or no, as the assets are in individual title?
I have a client wanting to purchase commercial property is the protector suitable in that situation?
The choices are twofold:
1. Buy the commercial property in the individual’s names and then transfer the net equity into a Family Protection Trust. This leaves the tax and land tax liability in the name of the individual.
2. Acquire the property in a Family Protection Trust which is a bloodline trust and it will become the tax and land tax liability entity. It is important that the Trust has a non-foreign person beneficiary clause so there is no land tax surcharge.
If there is no negative gearing Option 2. is preferred.
Yes, provided your existing SMSF Trust Deed allows for the substitution of governing rules. There are also no issues in relation to resettlement. You will need to plan for who is the Leading Member plus succession in the Leading Membership role. However, if you would like legal advice to that effect, contact us for more questions to [email protected].
- Flexible and matches the requirements of the Corporations Act 2001 for a special purpose corporate trustee;
- The Leading Member of the Fund is automatically appointed as chair;
- One Director – one vote rule with Leading Member veto power;
- The Leading Member can appoint or remove Directors;
- Only ordinary class of shares offered;
- On death of a member, the Board of Directors must appoint the deceased member’s LPR as a Director or lose its trusteeship;
- On death, only the deceased member’s LPR as a Director has a vote in relation to the payment of the deceased member’s death benefits; and
- All of the shares of the company are held by the Leading Member. On the death of the Leading Member, these shares are cancelled and new shares issued to the incoming Leading Member.
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