David Busoli, principal of SMSF Alliance, said the case highlights that good estate planning requires contingencies for both the expected and the unexpected.
The case dealt with the Dawson Superannuation Fund, which was established in 2005 by the late Peter Robert Dawson and his wife, Estelle Dawson (the first defendant), who were members and trustees of the fund.
“Estelle was Peter’s second wife. They were the only members and trustees of their SMSF. Peter’s son from his previous marriage, Tony, was his enduring power of attorney and was validly appointed as trustee in Peter’s place due to Peter’s dementia,” Busoli said.
“Peter’s son-in-law, George, remained the executor of Peter’s will. Peter and Estelle got divorced, but the property settlement, for valid reasons, was delayed for some time. Part of the settlement proceedings was for Estelle’s balance to be rolled out of the SMSF and her membership terminated. Prior to this occurring, Peter died.”
Busoli continued that the facts of the case show that Estelle and George wished to assume trusteeship over the fund and, therefore, exercise trustee discretion in relation to the payment of Peter’s member benefits.
“Peter did not have a binding death benefit nomination. They contended that Tony’s trusteeship terminated on the date of Peter’s death as the enduring power of attorney ceased at that time,” he said.
“The judge agreed that the enduring power of attorney had ceased but that Tony’s appointment was as an individual and, consequently, his trusteeship did not also cease.”
He added that careful consideration of the deed might have allowed Estelle to terminate Tony’s appointment, but this was not relevant as such action was not taken.
“There was some interesting discussion surrounding the continuing compliance of the SMSF following the expiration of the six-month grace period allowed for the LPR to be appointed,” Busoli said.
“Essentially, if the trust deed had stipulated that fund membership ceased on death, then Tony’s continuing trusteeship would not cause a SIS compliance problem as a single member fund requires two individual trustees.”
He added that as it did not, the judge felt that Peter’s membership continued, notwithstanding that he was deceased; therefore, his LPR, George, should have been appointed within six months of Peter’s death to ensure SIS compliance.
Busoli concluded that as SIS compliance was not the focus of the case, no determination was made in this regard.
“What was determined was that Tony’s trusteeship did not terminate on Peter’s death, irrespective of whether this caused a compliance problem for the SMSF or not,” he said.
“It’s probable that no one expected Peter to pass before the divorce settlement had been finalised, but this expectation proved faulty.”
