Self managed super funds give rise to funds that have generational holdings with children having member accounts in funds established by their parents
By  – Director of Feeney Family Law

Self-managed super funds provide families with the opportunity for generational holdings, with children having member accounts in funds established by their parents. These opportunities can give rise to uncertainty and concern if a marriage ends. The implications are different depending on which generation ends the marriage.

Superannuation funds need not be liquid. They frequently own rent producing property or property that can be used for primary production. If the member accounts that need to be rolled out of the fund are substantial, there may be the need to sell a property that had been intended to be a long term source of income. It may mean the disruption of careful financial plans at a time when people feel financially vulnerable.

If the parents are separating, then the discussion about protecting their children’s member interests and ensuring their payment, may not be entirely problematic, as there is likely to be a common interest in ensuring the children’s welfare.  This becomes more problematic, if there is a rift in the family, as a result of the end of the marriage and adult children adopt the role of emotional stakeholders with one or other parent.

If children are separating and the child of the fund holder is the only member, then there may be costs of valuation, but the integrity of the fund may again be able to be protected, as the family work together to ensure a best outcome.

There is again greater risk if the non-family member has a member interest.

For Family Lawyers these are day to day issues that can be resolved by the process of valuation and negotiation, but for family members, particularly retired parents with funds that are not liquid, the uncertainty produced by the process can cause additional stress and concern.

It may be wise to enter into a Binding Financial Agreement that deals only with a parental super fund, before entering into cross generational investment. Such an agreement, could protect that single asset class in the vent of the breakdown of a marriage.