Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 185

SAFs can provide powerful estate planning solutions

A small APRA fund (SAF), which is essentially an SMSF with a professional trustee, can provide valuable estate planning solutions for families with particular needs. In this article, we outline two strategies where an SAF may assist families in second (or subsequent) marriages and those caring for intellectually disabled children.

The SAF blended family strategy

With one in three marriages ending in divorce (according to the ABS in 2013), it’s no surprise that the number of blended families in Australia is rising. Those who remarry are often keen to ensure their new spouse will be well looked after if they die. However, there is also often a strong desire to leave assets to children from previous marriages. This can be particularly important when people remarry later in life and do not have any subsequent children.

Using the SAF blended family strategy, a super death benefit can be paid as a pension to a second (or third) spouse (known as the pension beneficiary) throughout that spouse’s life. Then, when that spouse dies, any remaining capital is returned to the original deceased super member’s estate and the capital is distributed to their children or other superannuation death benefit dependants (the remainder beneficiaries).

The strategy requires a special purpose superannuation trust deed that supports the death benefit design to be included as part of the super fund.

Members make a written binding determination to the trustee confirming the identity of the pension beneficiary and the remainder beneficiaries. The binding determination also includes the calculation method of the maximum pension benefit to be paid to the pension beneficiary.

Calculating the pension

The pension is calculated as a multiple of average weekly ordinary time earnings (AWOTE), which is currently $1,516 (as at November 2016) or $78,832 per annum. The use of AWOTE provides a strong indicator of purchasing power and provides members with a sound basis for determining their spouse’s future income needs.

For example, if a member wanted their spouse to receive an annual pension of $100,000 they would currently select an annual pension of 66 times AWOTE ($1,516 x 66 = $100,056 per annum).

The annual pension payment will be adjusted as at 1 July each year to reflect the updated AWOTE figure. The multiple of AWOTE will not change. The only other determination in calculating the annual pension amount is that the minimum pension required by superannuation law must always be paid. If the multiple of AWOTE chosen by the member was less than the minimum annual pension required by law, the higher minimum would be paid.

The pension beneficiary can vary the annual pension payment between the superannuation minimum pension amount and the amount previously determined by the member. However, the pension beneficiary cannot elect an annual pension payment above the amount pre-determined by the member.

The pension beneficiary cannot commute or roll over the pension payment, however they can forfeit their benefit and have it passed to the remainder of the beneficiaries at any time.

On the death of the pension beneficiary

Following the pension beneficiary’s death, any remaining balance is paid to the remainder beneficiaries. The payments can be made directly to the beneficiaries or may be paid to the original member’s estate and distributed via testamentary trusts.

In a SAF, the professional licensed trustee is an unrelated, independent and unbiased party.

While the blended family strategy outlined in this article is available in a SMSF, the concern for many people is that if there is friction between the second spouse (often also a member of the SMSF) and the children from previous marriages, things may not go to plan.

With cheque book in hand, the second spouse could disappear with the money. While the children would have recourse for breach of the trust deed provisions, locating the spouse and commencing legal proceedings could be a lengthy and expensive process.

Intellectually disabled adult children

SAFs can also provide members caring for intellectually disabled children with effective solutions for asset protection and financial care after both parents die. Often this involves planning for the care of an intellectually disabled adult child in their 50s or 60s.

Superannuation funds can provide tax-effective death benefit pension payments to intellectually disabled adult children, who, unlike non-disabled children, are not compelled to commute their death benefit pensions at age 25. The impediment of the disabled person (or their legal personal representative) needing to be a trustee is removed when using a SAF because, unlike an SMSF, a SAF has a professional trustee.

Following the death of the parents, the superannuation in the SAF can be paid as a tax-effective income stream to the intellectually disabled adult child.

The strategy works the same as the blended family strategy, however, rather than pre-determining a pension amount for the disabled person, the income is determined in consultation with family and carers and based on the person’s individual needs.

The existence of the professional trustee can also ensure that the disabled person continues to receive ongoing needs (medical, lifestyle, housing and financial) once the parents have died. Further payments can also be made from the pension to meet additional medical and lifestyle requirements.


A SAF can provide an effective estate planning tool for blended families who wish to provide for a second spouse during their lifetime and also wish to leave assets to children from former relationships. They can also provide peace of mind for families caring for disabled children.

Costs associated with managing a SAF are summarised in the Cuffelinks article, The other self-managed super funds.


Julie Steed is Senior Technical Services Manager at Australian Executor Trustees. This article is general information and does not consider the circumstances of any individual.

Graham Hand
December 11, 2016

Hi Yo, we have written about disability support in this article:

December 09, 2016

A couple of points: The comments here relate to any adult child with a permanent disability - not just intellectual disability.
The professional trustee of a SAF will charge substantial fees, equivalent to fees charged to administer a testamentary trust in a deceased estate.
By definition, the previous trustees relinquish all control over the investment strategy and asset allocation and that is usually the reason for setting up an SMSF in the first place.
The effectiveness of using a SAF needs to be considered against the advantages and disadvantages of a Special Disability Trust. Income from the SAF to the disabled child is tax-free because it comes from a super pension fund but the fund is an asset for Centrelink purposes and may affect the child's Centrelink disability support pension (DSP). The income from a special disability trust is taxable but the DSP is not taxable and therefore any trust income enjoys the low income tax free threshold. Most important, a special disability trust enjoys Centrelink concessions in the assets test for both the beneficiary and donors to the fund.
This is a complex area and needs careful consideration of particular situations. It is worth getting good advice.

December 11, 2016


Thanks for the info about using a Special Disability Trust! This is the first we'd heard of it (no thanks to Centrelink). As parents of a disabled child, who have ourselves become disabled through illness, we have no super left to set up any kind of SMSF, let alone pay fees to somebody else to manage an SAF. So we need to find another way to provide for our child when we've gone. Apparently (thanks, Google!) we've been able to set up an SDT since 2006 - ten years ago! The Centrelink and ATO websites give more info on SDTs than we can hope to process by ourselves. Looks like we'll need to see a lawyer to set up the family home in trust for our kid.



Leave a Comment:



Five things SMSF trustees should consider right now

Limits to a will’s power over an SMSF

What SMSF trustees need to know about benefit payments now


Most viewed in recent weeks

Who's next? Discounts on LICs force managers to pivot

The boards and managers of six high-profile LICs, frustrated by their shares trading at large discounts to asset value, have embarked on radical strategies to fix the problems. Will they work?

Four simple things to do right now

Markets have recovered in the last six months but most investors remain nervous about the economic outlook. Morningstar analysts provide four quick tips on how to navigate this uncertainty.

Three retirement checks for when you have enough

Not every retiree needs to gun for higher returns, but a conservative portfolio can court its own risks, especially with bond rates so low. But some retirees prefer to settle for a lower income.

How the age pension helps retirees cope with losses

It's often overlooked how wealthier couples can fall back on the age pension if a market loss hits their portfolio. The reassurance is never greater than in a financial (and now epidemic) crisis.

Have stock markets become a giant Ponzi scheme?

A global financial casino has been created where investors ignore realistic valuations in the low growth, high-risk environment. At some point, analysis of fundamental value will be rewarded.

Interview Series: Why it’s gold’s time to shine

With gold now on the radar of individual investors, SMSFs and institutions, here's what you need to know about the choices between gold bars, gold ETFs and even gold miners, with Jordan Eliseo. 

Latest Updates

Weekly Editorial

Welcome to Firstlinks Edition 377

The most significant change in asset allocation by Australian investors in recent years has been the move into global equities. It's been a canny trade for those who focussed on the US, especially great companies such as Apple, Microsoft, Amazon and Google. International equities experienced net inflows into ETFs of $722 million in August 2020 versus only $181 million for Australian equities. 

  • 30 September 2020

The elusive 12%: is superannuation at a turning point?

Such is the concern among unions and Labor about Government plans to undermine superannuation that an 'Emergency Summit' was called this week, and pioneer Bill Kelty evoked a social commitment.


My lessons from five decades of investing

As she retires after 47 years of investing, Claudia Huntington explains the art rather than the science of the trade, the value of a great leader and culture, and the insights she gives to new colleagues.

SMSF strategies

The impact of our marriage breakdown on our SMSF

Even if a marriage ends amicably, there are complications when partners share an SMSF. You can't simply 'split' the assets on a handshake, and who takes the capital gains and what's the impact on an estate?

Investment strategies

The future is always clearest once it is in the past

It's one of those times when a case can be made that the market is expensive on some measures, but reasonable on others. Better to do what the great companies do: instead of guessing the future, they create it.

Investment strategies

Emerging markets: Should I stay or should I go?

For long-term investors, the most important factor driving returns is the price paid to acquire a stock. Emerging Markets stocks exhibit favourable valuations on both an absolute and relative basis.


20k now or 50k later? What’s driving decisions to withdraw super?

The amount of retirement savings withdrawn under the Superannuation Early Release Scheme has surprised many. This comprehensive survey of thousands of members of Cbus explains their motivations.


The surprising resilience of residential housing and retail

With a pandemic, a recession and high unemployment, there's every reason to expect residential property and retail sales to be collapsing. But data shows both are resilient, so what is happening?



© 2020 Morningstar, Inc. All rights reserved.

The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use.
Any general advice or class service prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, has been prepared by without reference to your objectives, financial situation or needs. Refer to our Financial Services Guide (FSG) for more information. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.