Blended families create "unique challenges" for financial planners organising SMSFs death benefits, according to two specialist advisers of the Self-Managed Super Fund Professionals' Association (SPAA) who have devised the SMSF Will in response to growing demand for a solution.
Chris Hill from Chris Hill Legal said often financial planners were unaware of SMSF rules governing binding nominations, and so nominations for death benefits had failed on a number of occasions.
An SMSF Will refers to an ancillary deed outlining terms and conditions for how death benefits are paid upon the member's death and could overcome conflicts that arise between the surviving spouse and their step-children, he said.
"An SMSF Will specifically can make provision for the payment of specific items or specific assets out of the fund to specific players," said Ian Glenister from Glenister and Co.
Hill said many clients came from blended families and needed a strategy to overcome conflicts as well as protect assets from depletion through division and taxes.
They said they checked the concept against superannuation legislation, tax regulations and trust law and saw no reason why the SMSF member could not create a sub-trust that stipulates a conditional pension be paid to a surviving spouse from within the SMSF.
"I think most clients…want to look after their spouse, that's the key priority, but they also have a conflicting interest to look after the children," Hill said.
"This way, it provides a solution to that dilemma and it keeps key assets in the fund in this concessionary tax environment for as long as possible."
They said financial planners needed to partner with specialist advisers because they would be faced with an increasing number of blended families, and there were risks in doing nothing - although the Will relies on other safety nets, such as mutual wills and the appointment of a 'gatekeeper' replacement Trustee.
Hill said Future of Financial Advice reforms would open a "can of worms" regarding duty of care, and financial planners would be expected to partner with specialist advisers to give specialist estate planning to blended families.
"It's another way of adding value to your clients as part of your service offering," Hill said.