Due to the low market returns, many people today have started looking at setting up a SMSF (Self Managed Super Fund) as a good option that ensures better return. Best part of SMSF set up is that you along with your SMSF auditor have complete power to manage it and there are no limitations on your investment choices, you can rotate the fund in different options as you want to. Regular SMSF audit further ensures that your fund set up is done appropriately.
SMSF set up is a crucial decision you will make, still many ignore the considerations that can ensure better fund management. You do not have to be an expert to be able to set up your own SMSF but there are only 8 things you need to consider while setting up a SMSF for better returns, these can be listed as below:
Trustee Structure:
SMSF set up begins with choosing a trustee structure that is whether you want individual trustee or corporate trustee structure. Though most of the funds operate through individual trustee, it is important to consider your need before deciding on your need for trustee structure.
Trust Deed:
It lays the rules by which your fund must comply with. You might think why you need a trust deed when setting up a SMSF when there are government rules. Here is the answer you need a trust deed as it will contain details on members, establishment of fund, voting rights of members, operational matters and dealing with them etc. You must take note that all trust deeds are not similar, you will need to get one prepared from a reputed solicitor with experience of preparing documents for SMSF set up. Also the deed needs to be updated regularly with the changing law.
Investment Strategy:
Trustee of the fund is responsible to manage it appropriately as per the investment strategy laid down. Investment strategy thus needs to be planned in such a manner that it ensures benefits over a long period. You cannot take this lightly as it is also a requirement for SMSF audit done by specially appointed SMSF auditors.
Contributions:
When setting up a SMSF, the contribution of the members towards the fund is also decided, huge penalties in the form of taxes are levied in case excess contribution is made by any member. Hence this point is of vital importance.
Benefits:
SMSF set up is all about benefitting from all that you invest but here you need to remember that you will be able to benefit from your SMSF only after you reach the retirement age. However several other clauses that allow you to cash in even while you are working can also be added to the fund.
Estate Plan:
You need to know that your will generally does not cover setting up a SMSF as it is a type of superannuation benefits. You need to plan in advance as to how to manage your benefits in case of an unfortunate situation.
Obligations:
When you opt for SMSF set up, you rely on your trustees to manage it. Hence you need to choose your trustee wisely, only someone with adequate knowledge can do justice to your SMSF fund. Your trustee should be in compliance with the related rules and should easily pass through SMSF audit, conducted by SMSF auditors.
Role of Regulator:
You need to understand the role of a regulator in a much better way and that their main objective is to make sure that SMSF set up meet their requirements and also guide people so that they are able to do better. Once you understand their role you will be able to manage your fund better.
When you consider these things before setting up a SMSF there are less chances of you going wrong.