In recent years, there has been a spectacular growth in SMSFs both in numbers and investments, as SMSFs are flexible and tax effective investment vehicles. However, many SMSFs and their members face liquidity and other risks which are not well understood and insurance can be a valuable tool to mitigate these risks, and can also be used for creative estate planning solutions.

Regulations have recently been enacted which oblige SMSF trustees to address the life insurance needs of members, and failure to address these needs can result in the imposition of fines and penalties.

Below are some of the issues SMSF trustees should consider when putting together their insurance strategy:

  • Ensuring who is in control of the SMSF in the event of death or disability.
  • Liquidity and debt protection strategies to ensure that there are sufficient liquid funds in the SMSF to fund death or disability benefits especially if the fund has borrowed money.
  • Minimising the after tax cost of insurance in SMSFs and ensuring the right policies are being held in the fund.
  • Funding lump sum and pension strategies in the event of death or disability.
  • Strategies to address the risks of permanent and temporary disability through illness or injury.

An appropriate insurance SMSF strategy can provide the appropriate funding on death or disability of the SMSF member, and ensures that the right person receives the right funds at the right time.

An SMSF death and disability strategy is vitally important so please call me on 1300 366 316 or contacts us if you would like to arrange an obligation free review.