Should you include your children in your SMSF?

Should you include your children in your SMSF

Almost anyone can set up an SMSF together. SMSF’s can have up to four members. There is a proposal to increase this to six but at the time of writing this legislation has not passed.

Usually, members are all in the same family, although it is possible to set up an SMSF with other people.

So is it a good idea to add your adult children to your fund? Here are a few thoughts that might help you decide.

The benefits of adding your children to your SMSF

Larger investment pool and greater diversity

By adding your children to your SMSF you increase the amount you can invest. This means that you can diversify the SMSF portfolio even more, potentially including assets that typically have a higher minimum investment level such as property.

Passing down assets may be easier

Rigorous estate planning is essential for any SMSF, but with a careful strategy, adding your children to your fund could help pass down wealth smoothly. Their understanding of money management may also be improved by having oversight of your finances from an early stage.

Lower costs

By adding more people to your super fund, you may be able to reduce the average running costs of the account and avoid paying multiple fees.

Potential downsides of adding your children to your SMSF

Differing priorities

It could be difficult to figure out exactly how to structure your SMSF since the investment horizon, strategies and risk appetite could differ quite dramatically between you and your children.

Family dynamics

Before you get wrapped up in each other’s finances, it’s important that you have a clear, open and trusted relationship with your children and their partners. Have a transparent conversation about what being part of the SMSF means, and make sure they know what is expected of them when it comes to decision-making and the practicalities of tax time.

To understand what the right structure is for you and your family, please reach out to the Sherlock Wealth team to discuss your unique situation here

Any advice is general in nature only and has been prepared without considering your needs, objectives or financial situation. Before acting on it you should consider its appropriateness for you, having regard to those factors

Source: TAL

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