When discussing SMSFs and children the narrative always suggests that it isn’t a very good idea, especially with the issue of a family feud hastily highlighted.

It may surprise you to learn that only 4.5% of SMSF members are under 34. It may further surprise you that only 7.3% of SMSFs have three or four members. When you consider that over half of these may be made up of siblings and work partnerships, the family SMSF just doesn’t really exist.

Therefore, with the family SMSF so rare, the benefits of one never really gets explored. But when you actually dig deeper into the idea of a family SMSF it may be worth sitting down and discussing could this work for my family?

Before we discuss the merits of an SMSF family fund, it is important to first determine who can be a member of an SMSF. The maximum number of individuals that an SMSF can have is four. So if you come from a family of five, excluding a child from the SMSF might make Christmas a little awkward this year.

Children of any age can become members of an SMSF, but the superannuation rules also require all fund members to be trustees or directors of a corporate trustee of the fund. This is a crucial point, as all members of the fund are accountable and responsible for decision making and the running of the fund. No mean feat when superannuation rules are in play. A caveat to this is that children under age 18 are not allowed to legally act as a trustee or director. In this scenario, their parent or guardian will act as a trustee or director in their place.

So, we’ve established who can be members and trustees and you have two eligible young (or adult) children ready to go. The next hurdle to clear is the suggestions that SMSFs may be ‘expensive’. This is perfectly logical given the potential administration fees an SMSF can have, and that children will more than likely have quite small balances. However, including them into your fund should have no real effect on fees.  This is because adding smaller amounts of superannuation into an SMSF, with assets that will likely be simple, does not create much or if any extra work. The end result, fees are unlikely to eat up your children’s balances.

Now once your children are in your SMSF, they will be the recipient of all the traditional benefits of being a member of an SMSF. They have control over their assets and can choose a risk profile that is entirely appropriate to them, not one designed for a collective wide range of individuals. They can also enjoy the benefits of consolidating their super assets and flexibility to diversify their super investments. A larger overall fund balance increases the investment opportunities your family can undertake.

And where do your children learn to do all this? Well a family SMSF can encourage engagement in super at a younger age. You will be able to have discussions around the family table and teach the lessons of financial accountability, responsibility and management. You get to invest, grow and make returns as a family. A priceless benefit.

That leaves the final hurdle to clear as estate planning and family feuds; a danger to the smooth operation of a family SMSF. This risk normally arises when a parent passes away and their spouse, children or spouses of the children receive death benefits against the deceased parent’s wishes. They could even take unruly control of the fund.

But this risk also occurs in simple two-member funds and is something that responsible planning can avoid.  Something we, at the SMSF Association, strongly promote. Therefore, borne out of this risk, family SMSFs can also encourage proper estate planning.

From an intergenerational perspective proper planning highlights another family SMSF benefit. If children have knowledge about how their parents’ affairs, finances and superannuation are being managed, this familiarity can help limit the anguish and confusion concerning estate planning. Family SMSFs can then help get the family business into super, or help devise exit strategies for parents who have lost capacity or passed away and further allow the SMSF to continue on with the children into the future.

So yes, a family SMSF is definitely not for everyone, but let’s not be so quick to dismiss it either.