Disadvantages of Life Insurance in a SMSF Fund

Now that legislation requires trustees / members to consider the holding of life insurance on behalf of members within the fund, what are the disadvantages.

  1. The fund deed must allow the process and various different administrative aspects.
  2. There are no restrictions who can receive death benefits from a self managed superannuation fund.
  3. More documentation is required than normal and if the client has no SMSF, then the fund would need to be set up with considerable more documentation and expense.
  4. Preservation issues can apply for example , accessing proceeds from super arising from “own occupation’ TPD.
  5. Access to proceeds once paid is restricted by the superannuation law.
  6. Some benefeciaries will pay tax on what they receive from the super fund.

REMEMBER, the above are issues that auditors focus on when it comes to the audit of a SMSF. Our audits for funds start from $300 and follow a comprehensive audit plan.

DISCLAIMER: The above is general advice only, you should not act on this advice without consulting a professional adviser to discuss your personal circumstances.