Setting Up an SMSF for Your Children
If you’re interested in the idea of setting up an SMSF for your children, there are a couple of factors you should consider before jumping into the deep end.
Under normal circumstances, setting up an SMSF requires you to overcome a few hurdles before it all falls into place. With children, the process takes even more effort.
Here are the two key points you should be addressing if you wish to set up an SMSF for your children.
1. Age issue
In terms of super funds, there is never any age restriction to becoming a member of one. However, there are age restrictions to being trustees, which is the first notable hurdle that comes with setting up an SMSF for your children.
Given that every member of an SMSF is also a trustee, if your children are under 18 years of age, then they cannot be a trustee. However, there is a solution for this problem.
As the parent you can act as the trustees on your children’s behalf. They will be the official members of the SMSF, but you will be the trustee and be able to make the decisions for their fund until they turn 18 and automatically become the trustees.
A parent can act as a trustee for more than one child in the SMSF, so that means you can cover all your children.
2. Residency issues
Naturally, as your child grows older, they may be inclined to travel overseas for some time. In certain circumstances, a super fund can become non-compliant if a member/trustee of the fund is overseas for a prolonged period of time.
In this event, you will have to take note of the residency requirements of the fund. Also take management rules and active member tests into consideration to ensure your child’s overseas travel does not breach Australia’s definitions of a superannuation fund.
A temporary absence shouldn’t affect the fund’s status as having its central management and control residing in Australia. In certain cases, a temporary absence can cover a number of years overseas. However, each case is different and determined by an objective test.
If their out-of-country status will hurt the SMSF, you can apply to be granted power of attorney on their behalf, so you become a trustee while they’re out of the country. There is a fairly large process to put it into effect. But as long as you don’t mind, it can provide safety to your children’s SMSF.
These are the two points you need to consider if you’re contemplating starting up an SMSF for your children. For more guidance on what you will need to do, call us on (07) 3251 4444 or contact us through our website.
If you have set up an SMSF for your children, be sure to share your thoughts and experiences in the comments below.
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