Self-managed superannuation funds (SMSF) need to review their documentation and insurance arrangements in response to recent legislative changes regarding people with a terminal illness.
"If you have a terminal illness and a doctor who specialises in terminal illness signs off with another doctor, stating that there is a good probability you'll die within the next 12 months, you can have full and free access to your superannuation," SMSF Advisory Group director Grant Abbott told advisers at a Macquarie Group-sponsored conference in Sydney last month.
The amendments to the Superannuation Industry Supervision (SIS) Act and the Tax Act mean SMSF members in that situation, regardless of their age, could take their entitlements out as a lump sum or an income stream tax-free, Abbott said.
However, many SMSFs are not in a position to facilitate the changes to the regulations.
"Most of the SMSF strategies we review don't have the terminal illness clause in their trust deeds, meaning a lot of them need to be upgraded," Abbott said.
He said the latest legislative changes highlighted the importance of re-examining SMSF trust deeds on an annual basis.
The new legal parameters should also encourage SMSF members to look towards including trauma insurance cover within the fund, he said.
"It makes sense to put trauma in super because if you have a terminal illness . the best place to look after your estate [is] in the super fund," he said.
"If I set things down inside my super fund, and I have an SMSF will, what I've got is certainty.
"I can sit down and say this is exactly what's going to happen in the event of my death.
"As soon as it sits outside super, even if you have testamentary trusts in place, it's opened up to be challenged by all of your dependants.
"Inside a self-managed super fund no-one can challenge it whatsoever."
