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Should you include your children in your SMSF?

A self-managed super fund can be a great way to prepare for retirement – and you can add up to three other members as trustees quite simply, provided they are friends or family and over 18 years old. 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

  • More to invest and greater diversity By adding your children to your SMSF, you increase the amount you’re able to invest. This means that you can diversify the shared portfolio even more and include assets that typically have a minimum investment level - such as property. This broader approach and higher level of investment could see you reaping the rewards.

  • 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.

The negative side 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 kids. Often younger people are keen to opt for a riskier strategy, but don’t let this derail your retirement plans if you’re thinking of dipping into the fund in the shorter-term.

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 kids and their partners. Have a transparent conversation about what being part of the SMSF means, and make sure the kids know what is expected of them when it comes to decision-making and the practicalities of tax time. Of course, I’d be happy to provide you with more tailored advice, and to adjust your fund as required. Once you’ve settled on the right decision for you, I could assist with adding the children to your account, or even set them up with their own SMSF as you prefer. Please get in touch and we can discuss your options.

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.

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