Posted on April 16, 2015 by GSCPA Admin
A recent decision handed down by the WA Court of Appeal has caught our attention as being “critical” for our Self Managed Superannuation Fund (SMSF) clients and follows on from last month’s Newsletter article.
In late 2013, the WA Supreme Court handed down the decision of Ioppolo v Conti [2013] WASC 389, which was subsequently appealed with the outcome of the appeal recently handed down.
The original case involved Francesca Conti and Augusto Conti, who were married and both individual trustees and members of their SMSF. Francesca had children who were not Augusto’s biological children.
Their SMSF’s trust deed stated that unless there was a binding death benefit nomination, death benefits were to be paid at the trustee’s absolute discretion which is a very common provision of many funds deeds.
Francesca did not leave a valid binding death benefit nomination before she died. In her will, however, she stated that her entitlements in the SMSF were to be paid to her children and specifically stated that no SMSF death benefit be paid to Augusto.
It appears that Augusto had all the power to appoint a new trustee and he arranged for a company called ‘Augusto Investments Pty Ltd’ to be appointed as the trustee of the SMSF of which he was the sole director and shareholder.
With Augusto left as the sole trustee, he decided to pay all of Francesca’s benefits to himself and not to her children as clearly directed in her will.
Two of Francesca’s children were executors of Francesca’s estate, and they brought an action on several grounds. The distribution of the death benefits was at the heart of the dispute.
In the 2013 decision, the plaintiffs, who were Francesca’s children and executors, argued that Francesca’s legal personal representative must be appointed as trustee of the fund because the fund was required to remain a SMSF. This argument failed in the 2013 decision and the plaintiffs lost again on appeal.
There is a common misconception that a trustee’s legal personal representative automatically steps into the role of trustee of the SMSF. Whether or not this is the case will depend on whatever the SMSF’s trust deed says.
If your SMSF has individual Trustees you need to check your trust deed to determine who will be the trustee upon death so as to achieve the desired outcome for the estate.
Many of our clients have a SuperCentral Trust Deed and we can confirm that under the current Governing Rules for the SuperCentral Deed, the Legal Personal Representative of the deceased Trustee will automatically become a trustee of the fund (this is on the basis that the Legal Personal Representative is not a disqualified person according to the SIS Act).
Where a SMSF has a corporate trustee with multiple directors, upon the death of a member, a successor director can step into the place of the deceased member if required or one director can continue to operate as sole director of the corporate trustee.
The plaintiffs also argued in the 2013 decision that because Francesca’s Will directed all benefits to be paid to her children, Augusto had not acted in good faith in paying himself. They lost both the 2013 decision and the appeal.
Our Superannuation Team and our network of Lawyers are well equipped to assist you with any estate planning issues. Call us on 9316 7000 should you require assistance in this area.
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Posted on March 5, 2015 by GSCPA Admin
Death is not something we think about, but inevitably it will happen to every one of us! Your Superannuation is likely to be one of your most valuable assets and you may not realise that your superannuation does not ordinarily form part of your estate and is therefore not covered by your Will.
We understand that estate planning can be daunting and so we work closely with trusted Law Firms to ensure your estate planning is tax effective as well as ensuring the outcome you want.
You have the option to provide the Trustee of your fund with a death benefit nomination. This is a notice requesting the payment of your superannuation entitlement be paid either to your estate or one of your specified dependants.
There are two types of nominations:
- A binding nomination which is binding on the trustee – that is the trustee must comply with it;
- A non-binding nomination – the trustee can exercise their discretion not to follow your nomination.
Please be aware that if there is no remaining trustee, your legal personal representative (the executor or administrator of the estate) acts as a trustee.
A valid binding nomination gives you certainty that your superannuation benefit will be paid to your nominated beneficiaries. If you have structured your Will to achieve certain outcomes, by having a binding nomination in place to your estate, your executor will pay out your superannuation benefits according to the terms of your Will. Alternatively a binding death benefit nomination can be used to direct your superannuation benefits to a beneficiary directly.
Unfortunately superannuation members die with no valid ‘nomination’ in place. If no binding nomination is made, the trustee or Legal personal representative (if there is no remaining Trustee), will use their discretion to distribute your superannuation entitlement. If the binding nomination form is invalid because you nominated an invalid beneficiary (e.g. your loving pet), then your death benefit will be paid using the remaining trustees’ discretionary powers.
For a nomination to be binding, you must nominate that your superannuation death benefit is to be paid to either your dependants or to your estate. Eligible persons are as follows:
- Legal Spouse
- De facto spouse including same sex partner
- Any child including any adopted child, step-child or ex-nuptial child
- Any person who was a dependant of the deceased just before the death
- Any person you have an interdependency relationship with
- Legal personal representative of your estate
Please be aware that an otherwise binding nomination is generally no longer binding when the nominated person is the deceased members spouse and there has been a divorce or permanent separation.
If you have a binding nomination in place, you should make sure you update your nomination to reflect any change in circumstances like marriage or the birth of a child.
You can provide a non-binding nomination which enables you to advise the trustees of your SMSF on how you wish your superannuation savings to be distributed upon your death. However because it is non-binding, the final decision is still at the trustee’s discretion.
Your SMSF’s trust deed will detail what information a binding nomination requires in order to be valid. Some deeds require two witnesses (aged 18 years or over who are not nominated as a beneficiary) to sign the nomination document and it can also stipulate that the binding nomination has to be renewed every three years or it will lapse. SMSFs are able to offer non-lapsing or lapsing binding nominations, depending on the terms of the SMSF’s trust deed.
If you are unsure if you currently have a binding nomination in place or wish to discuss any of the information above, please contact Helen Cooper, the Senior Manager of our Self Managed Superannuation team.
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