Mr Hay-Bartlem noted that a member benefit is a benefit paid to the member before death and if the member is over 60, the rate of tax on withdrawals will usually be zero. “However, if we have a death benefit, which is a benefit paid to someone else because of their death, then we have a tax issue. That can range between zero to 30 per cent and potentially Medicare as well,” he said.

“What that means is that if we pull the money out of [the SMSF] of a 65 year old widower the day before they die, we pay tax at zero. If it’s a payment after he’s died and it goes to our non-dependant children then we’re looking at tax of up to 32 per cent.”

If there’s a large taxable component in the fund, advisers may want to think about whether it’s the super should be withdrawn while someone is alive rather than waiting till after their death and triggering a big tax issue.

“[However], when you get that call from the client saying ‘Mum has had a stroke, she’s in a coma, should we withdraw the super?’, the answer should not be an immediate ‘Yes’ without thinking,” he cautioned.

“There’s a few things to consider before you just automatically pull it out.”

One of the first considerations is whether the client has met a condition of relief. While a member can withdraw their super at age 65, determining whether they can withdraw their super at age 60 will depend on whether they’ve satisfied a condition of release.

One of those is that the member has reached their preservation age and has also ceased work and doesn’t intend to work again, he explained. “[Another condition of release is] a terminal medical condition. Generally, if you’ve got Mum having a stroke on the way to the hospital, you’re not going to get two medical practitioners to certify that she’s going to die in the next two years. It’s just not going to happen that quickly. Similarly with permanent incapacity, you’re not going to get medical reports,” said Mr Hay-Bartlem.

“So when you’ve got this kind of situation, before you just start reaching for the benefit payment paperwork, ask yourself ‘have we satisfied that condition of release, it can be trickier than you think.”

If the money is pulled out without satisfying a condition of release, then it will be illegal early release.

Mr Hay-Bartlem said advisers also need to read the deed and carefully consider the practical process involved in withdrawing the money.

“We need to have the member asking for the withdrawal of the benefit usually and the trustee needs to agree.”

“If the member is in an ambulance on the way to the hospital, then are we are to sign paperwork asking for the withdrawal of their super?”

“How do we actually get the request in writing? Who's going to be signing that? Is it something that your attorney can do both under the law and the trust deed.”

This where the best interests of the member also need to be considered, he explained.

“Now I can tell you that all of the files I’ve had of people withdrawing money at the last moment because Mum is on the way to hospital, guess what mum did? She recovered? So who's going to tell mum that on Friday morning when she was doing her yoga class, she had $3 million sitting in super and by Saturday morning when she was lying in hospital, not dead, it’s all being pulled out.”

“So is it actually in the member’s best interest to be doing a deathbed withdrawal? Who’s going to get into trouble if they’ve withdrawn the money and Mum lives another 10 years? By withdrawing that money they’ve gone from a low tax or tax free environment to paying tax on earnings outside the super system.

“So, you need to weigh those things up.”

It is also important to look at what the terms are under the power of attorney.

“Are you forgiven for those kinds of conflicts or are we going to have some serious problems. It might be Mum or other family members that don’t benefit from it and there could be a range of possible lawsuits.”

Advisers and their clients also need to think about whether it will be pulled out as cash or if there’s going to be in-specie transfers.

“We also need to think about who are the trustees or directors of the fund [sic] and what we need to do to make the withdrawal effective,” he said.

If the money is pulled out, Mr Hay-Bartlem said this could also completely undo all the estate planning that had been put in place.

“Will you end up with an unhappy beneficiary that would have got the super but now won’t get it?” he questioned.

“So it’s really important to think through these things as well as the technical stuff around member versus death benefits.”