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Is your SMSF estate planning up to date?

Posted on December 15, 2018

Like the well-known case of Katz v Grossman, a recent court case (Ioppolo & Hesford v Conti) heard in the Western Australia Supreme Court highlights the importance of control and binding death benefit nominations (BDBN) for SMSFs and the potential problems and consequences that can occur if found invalid .

According to the SMSF specialist Julie Dolan ( “SelfManagedSuper” Magazine), “One of the main aims of estate planning is to deliver on the promise of looking after a client’s family, while minimising any future legal dispute.”Potrait Of Grandfather Pointing With Family - photostock - freedigitialphoto

In this case Mr and Mrs Conti were both individual trustees and members of the Conti Superannuation Fund. Mrs Conti passed away and Mr Conti retired as trustee and appointed a single director corporate trustee. The trustee then proceeded to pay Mrs Conti’s death benefits to Mr Conti despite the will of the deceased which stipulated that superannuation benefits were to be paid to her four children. There were no binding death nominations in force at the date of death as the two previous nominations have lapsed after 3 years. The SMSF trust deed provided that in the absence of a binding death benefit nomination, the trustee may in their absolute discretion pay the death benefit to a person who was dependent on the member at the relevant date. The argument by the executors of the deceased estate (two of the four children) that they should have been appointed as the trustees was unsuccessful.

The court ruled that Mr Conti was not obliged to appoint the executor(s) of a deceased member as a trustee of the SMSF and the surviving trustee was entitled to distribute the deceased member’s death benefit to himself, despite a contrary direction in the deceased’s will for her SMSF entitlements to be paid to her four daughters.

The lessons from this case are that SMSFs need to understand the importance of comprehensive estate planning and documentation, the need to ensure that the SMSF trust deed is up to date and contains relevant powers and clauses regarding distribution of death benefits, the importance of non-lapsing BDBN and having the right mechanism in place to ensure that the surviving spouse does not control the distribution of death benefits if they are not to benefit from any distribution.

Does your SMSF have the right estate planning mechanism in place?

If not, we will be pleased to assist you by offering consultation with the SMSF specialist Julie Dolan who is now part of our HCG team and provides invaluable advice to our SMSF clients!

We are only a phone call away!

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