Investors tend to view family trusts and SMSFs as an ‘either/or’ investment choice. Some overlook family trusts because they are not as tax effective as SMSFs whilst others don’t want to lock their money away until retirement through a SMSF. We recommend that your consider having a mixture of SMSFs and family trusts to yield the wealth-building benefits of both.
Here are 3 reasons on why you should consider including a family trust in your investment portfolio:
- Family trusts are simple and flexible
Family trusts are more simple and flexible. This is because they are easier to establish, operate, have no contribution limited rules and have no preservation rules like super. Super contributions are a big commitment – family trusts provide financial security because you have access to the funds.
- Family trusts are great for the wealth-building process
Family trusts are particularly worthwhile for investors not yet ready for the commitment of locking away savings until their retirement. As time goes on, allocated amounts of wealth can be reallocated to the SMSF.
- Family trusts are truly long-term investments
Upon death, SMSF are sold up and paid out, however, family trusts can continue building wealth with control being passed on to the next generation.
Here are 3 reasons on why you should consider including a SMSF in your investment portfolio:
- SMSF have tax strategies
Your SMSF can be internally structured so that tax is reduced. The reduced capital gains tax is a core tax advantage whereby no tax is payable on earnings from assets during the pension phase.
- SMSF allow borrowing
The term limited recourse borrowing arrangement (LRBA) is used to describe borrowing from a SMSF to purchase an investment asset like shares or property. SMSF borrowing can allow you to purchase an asset immediately beyond your current financial means. This is
- Asset Protection
Impacts from financial losses following litigation and bankruptcy can be alleviated by having SMSFs to fall back on for retirement. SMSF benefits can be protected from both of these scenarios. You need to separate your SMSF from personal or business investments of members so that the assets are clearly owned by the SMSF.
Choosing a SMSF and family trust investment mixture can give you the best of both worlds. You can receive tax benefits, have access to some funds for financial security, and also assist in the intergenerational transfer of wealth. Your choice depends on your personal circumstance that includes your age, income and property status.
If you have any queries about SMSF, wealth planning – or anything finance-related; please don’t hesitate to get in touch with the Fortis Accounting Partners team on 02 9267 0108, or via info@exemplary-financial.flywheelsites.com.
