SMSF Estate Planning
A self managed superannuation fund can be a terrific planning tool for individuals and may also allow those individuals flexibility in determining how their superannuation monies are invested. However, it is important to recognise those benefits may not be paid to the chosen beneficiaries without an effective estate planning structure in place.
One court case which confirmed the importance of estate planning was Katz v. Grossman. A brief description of the case was that a couple (father and mother) were trustees of a self managed superannuation fund which held assets in excess of $1,000,000. This couple had two children, a daughter and a son. One of the trustees (the mother) passed away, and the father appointed his daughter to replace his deceased wife as the other trustee of the Fund. When the father passed away, the daughter subsequently appointed her husband in place of her deceased father. The father's will stated his superannuation benefits were to be divided equally between the son and daughter, however as trustee of the self managed superannuation fund, the daughter paid all of her father's death benefits to herself, leaving the son nothing. The son fought the decision in court and lost, as the court found that the trustee had to administer the fund in accordance with the SIS Act, but had no duty to do so in an equitable manner.
The outcome in the above case was different to the wishes of the late father. However, had he used more effective estate planning tools such as binding death benefit nominations, then the payment of his benefits may have then been in accordance with what was stipulated in his will.
A binding death benefit nomination is a document that compels the trustees of the self managed superannuation fund to pay the death benefit in accordance with the deceased persons wishes.
There are two types of binding death benefit nominations: lapsing and non-lapsing. Lapsing binding death benefit nominations last only three years, at which point the nominations cease to be binding. A non-lapsing binding death benefit nomination will remain in place until such time as the nomination is amended or revoked.
Binding Death Benefit Nominations are but one of the planning areas which should be carefully considered. If you would like to discuss estate or other planning matters for your Self Managed Superannuation Fund, please contact one of our experts at McGillivrays
Andrew Hobson
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