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Sep 16, 2022

Insurance

in SMSF Technical Forum

Have a two member fund, Member 1 (M1) and Member 2 (M2). The fund has a corporate trustee.

The Policy owner is M1 in their name only, the life insured is M2. The deduction from the member account for the value of the insurance policy comes from M1 (presumably attempted by the accountant because their member balance is bigger in an attempt to even out balances).

Queries are:

Confirming the policy needs to be held in the name of the trustee? And shouldnt the deduction from the member account come from M2 ? Or is their an argument from M1 point of view to state, as they are the ones benefiting from the insurance it should be deducted from their balance?

2 answers0 replies

Comments (2)

THE AUDITORS INSTITUTE

Sep 16, 2022

Hi Terrence

Life insurance owned by a SMSF should be in the name of the trustee(s) in trust for the Superannuation Fund.

If a SMSF is paying for non SMSF life insurance arguably there is a breach of the financial assistance & early release of benefit rules that are in SIS.

If the insurance is for M2 the deduction is required from their member account. My view is that there is no ability to allocate insurance expense re M2 to another member's account.

If other members have a view please let the forum know.

Thanks

SMSF AA

Umesh Manek

Sep 17, 2022

Replying to

Hi mate, I agree, its loan/financial assistance to the member. I believe its loan to M1 as M1 is the owner of the policy. From SMSF's point of view the beneficiary of the personal policy of the member is not relevant.