A Self Managed Super Fund (SMSF) is one great investment for those who want to have stable wealth after retirement. While it is not for everyone, it is important that when one wants to be part of the SMSF, such a person should know the key features of being an SMSF member.
In this article, we will discuss the characteristics of SMSF to provide you better understanding before you pursue the SMSF path.
1. Trust Deed
SMSF could not be established without a trust deed. A trust deed is a contract or legal document stating the rules that would govern your super funds. Once established and signed by parties, the deed is now binding and existent.
2. Investment plan
Any person who wishes to invest in SMSF should submit an investment plan in writing. It is where your investment strategy, plans, retirement goals, and other objectives are written. The investment plant should be established under your circumstances.
The SMSF requires four members. Each member can be either friends or relatives. Meanwhile, SMSFs are regulated with strict rules and members need to meet the following qualifications.
- l Signed and consented to the SMSF agreement
- l Willing to take the SMSF responsibilities
- l Not disqualified under the SMSF rules and regulations
- l With good financial standing
- l Don’t have an employee-employer relationship with any of the SMSF member
- l Compliant with the SMSF regulations
- l Children under 18 must be represented by parent/s or guardian
3. Members are all trustees
There are two types of trustees in SMSF. The first one is called as an individual trustee working in their capacity. The second is a corporate trustee appointed by the company. Both trustees, as a general rule, can control the funds however they want.
However, no trustees under the SMSF shall receive remuneration for the services done as an SMSF member. If he does, he is violating the SMSF rules and thus disqualified to be a member.
SMSF fund is retirement benefits
SMSF is a type of investment for retirement. The proceeds from your SMSF can be used to sustain yourself after superannuation or retirement. Superannuation refers to retirement based on the predetermined age mandated by law. On the other hand, retirement per se is the voluntary retirement of a person at any age allowed by law.
Whether it is superannuation or voluntary retirement, the SMSF fund is meant to provide retirement benefits to the person. It can be in the form of lump-sum withdrawals or pension withdrawals. Lump-sum withdrawal can be made as soon as you reach 65. Pension withdrawals, however, are made when the pension is commenced in the SMSF.
SMSF is a big investment and there are many risks involved once you start. As such, you must be knowledgeable enough of the features and characteristics before diving into this venture. To make sure that you are in good hands, it helps that you equip yourself with knowledgeable advisors to prevent you from getting into trouble in the future.
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