Prepare an exit plan

Importance of an exit plan

It's important to think ahead when setting up your self-managed super fund (SMSF) and consider any situations or unexpected events where you may decide to cease your SMSF, or 'wind up'.

Some common situations are:

• a relationship breakdown between the trustees
• lack of time to manage the SMSF
• poor performing investments
• an illness or accident that leaves a trustee incapacitated (and unable to perform their role as a trustee)
• when all members have left the SMSF (if they've moved to another fund or paid out all their benefits)
• death of a trustee.

There may be other situations that might make you decide to wind up your SMSF. Having an exit plan may make it easier for you to wind up when required.

Considerations for your exit plan

You will need to consider the individual circumstances of your SMSF and its members, as each fund will be different. You should consider:

• instructions from your members on how to deal with their benefits upon their death, including any valid binding death benefit nominations
• any appointed enduring power of attorney
• the estimated costs of winding up
• the liquidity of the fund's assets for
  • making rollovers
  • paying benefits
  • final costs
• whether all trustees can access the fund's records and electronic transaction accounts
• who will keep the fund's records once wound up.

You need to make sure every trustee agrees with the exit plan by:

• documenting the decision in meeting minutes
• having the trustees sign it.

Once the exit plan has been prepared, you should keep it with the fund's records.

Review your exit plan regularly

Just like your investment strategy, your exit plan should be reviewed and updated whenever necessary.

When reviewing your exit plan, you should reassess your SMSF and each member's circumstances to determine if:

• an SMSF is still the right option for all its members
• the trustees still have the time and capacity to manage the fund
• it's still cost-effective.

If these circumstances have changed, you may need to wind up your SMSF.