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A super problem in estate planning

Warren Wackerling and Luke Bull – 8 March 2014

Introduction

A WA Supreme Court decision is a warning to regularly consider your superannuation fund in your estate planning.  It highlights how special attention must be taken if you transfer or accumulate assets into a self- managed superannuation fund (SMSF).  The consequences to this family were costly and disappointing for the deceased mother’s children. 

Facts

In 2010 the mother died leaving a series of purported ‘binding death nominations’ directed on her SMSF to pay entitlements to her husband.  She also made a will stating her SMSF entitlements of some $650,000 were to be paid to her children upon her death to the exclusion of her husband.

Notwithstanding the clear intent in her will, the husband assumed control of the SMSF through a corporate trustee and directed the SMSF to pay the deceased’s entitlement to him rather than the children. 

The children failed on an application asking the Court to order the husband repay SMSF entitlements to them.  Essentially, the Court found there was a technicality in the administration of the SMSF which failed to correctly record the mother’s wishes according to law.  The husband was therefore entitled to exercise a discretion in paying the mother’s accumulated benefits to himself to the exclusion of her children.

What do I need to be careful about?

Just like your car or your health, a SMSF requires regular ‘servicing’ to avoid a ‘crash and burn’. Superannuation can be a significant value of your estate which if not considered correctly can have drastic consequences for your family. 

We recommend checking your estate planning every 2 years or so to ensure what you have in place is current and enforceable at law.  Taxation requirements are only a part of fully managing your SMSF.

This article is for general information only and should not be relied upon as a substitute for specific legal advice.