Do-it-yourself superannuation funds are a great tool for those who want to take control of their investments rather than letting a fund manager make all the decisions.

But they can also be a great tool for people who want to ensure their family is looked after in the event of their death. In short, they can be a great estate planning tool.

This has been the case for public relations consultant Vivienne Hardy (see panel). A self-confessed control freak, she jokes that the establishment of a DIY or family super fund, which will include herself and her son as members, will let her "rule her family from the grave". And the fund will allow her to do it tax effectively, as well.

So why would you want to handle your estate planning through a super fund, rather than simply doing it through a will? One reason is that you can make a binding beneficiary nomination that can't be challenged, and overturned, in the courts.

Anna Carrabs, a tax partner with William Buck Chartered Accountants, says using a superannuation fund for estate planning is an effective way of transferring wealth because it ensures the transfer will be administered in accordance with a deceased's wishes and intentions. In particular, she says, it covers how the wealth will be transferred that is whether it will be as a lump sum amount or a pension or an "in specie" distribution of assets.

"This means that, rather than realising assets to pay out death benefits, the assets themselves can be transferred from the super fund," she says. "In doing this, care would need to be taken to ensure that capital gains tax and stamp duty issues have been dealt with."

The payment of a pension, as opposed to a lump sum, has advantages, she says.

"It allows you to guard against your wealth being passed to your child's spouse in the course of divorce proceeding, it allows you to provide for your children's and grandchildren's educational and living expenses and it allows you to pay regular income streams to incapacitated children or dependents," she says.

"Estate planning through the super fund is also effective because it means you can control to whom the wealth will be transferred, namely children and grandchildren and not in-laws.

"Children get married and the last thing many parents wants is for their assets to become part of a divorce settlement."

If the assets are paid as an income stream, rather than as a lump sum, the income will be counted for divorce purposes, but the assets that the income stream is based on will be safe, she says.

There is a trend for parents not to have a lump sum paid until their children are 25 or even 35 years old.

Carrabs doesn't think this is leaving it too late for them to receive the benefit of that lump sum, especially if they are receiving an income stream in the meantime.

"The income stream still lets them get ahead in life," she says. "For example, it can be used to pay off a mortgage."

Matters of estate

Rather than taking care of her estate planning through a will, Hardy enlisted chartered accountant Anna Carrabs to help her address some of her needs through a DIY super fund.

Hardy's overall desire is to do the right thing by all. And her blended family makes that no mean feat. "There is a 17-year age gap between my son and daughter," she says. "This means he is married and already established in life while she is still going to school."

At the top of her mind is the fact she is a single parent so she needs to ensure her wishes are set out in a way that she knows will be adhered to.

"If anything should happen to me, if I get knocked over by a bus tomorrow, I want to ensure my daughter is adequately taken care of financially as well as emotionally," she says. "At the same time I want to be scrupulously fair with both children."

And to her grandchildren: "I have my son involved in the process so as to maximise any benefits for my grandchildren."

In addition, she wants to contribute financially and emotionally in the event of any unforeseen events.

"When you're talking four generations my parents, myself, my children and grandchildren I'd put money on upsets arising. When the chips are down I want to be there for the family and that means my estate needs to be very, very flexible. Finally, I want to leave something to the daughter of my ex-husband who is also my daughter's sister.

"It is all a bit complex really, but with the family super fund structure Anna is putting in place for me, I am confident I can achieve my goals and pass the fund through to my children and grandchildren. Given that I am a Commercial Nominees casualty, I am determined to get things right this time around."

A DIY fund or family fund as Carrabs prefers to call it will become her son's fund, too, so he will have a financial interest in running it. "Once it is all finalised I will get all the people who are involved and talk through the process to make sure everyone is very aware of what I want to happen." LB

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