An industry lawyer has shed light on a common misconception in SMSF estate planning which can give way to a trustee’s wishes being challenged.
Speaking at a NSW state chapter event for the SMSF Professionals’ Association of Australia, Townsends Business & Corporate Lawyers’ Michael Hallinan suggested providing justification for a death benefit nomination could create grounds for contention.
He said the reasons offered for nominations can be seen as unreasonable, therefore exposing a trustee to analysis or criticism.
“If you don’t give reasons, you’re not giving the people who are trying to challenge ammunition,” Mr Hallinan said.
“If you think those reasons would be accepted by a reasonable person, then fine, but if you have an enquiry about whether a reasonable person would find those reasons convincing or acceptable, then it’s probably better to keep quiet.”
Mr Hallinan stressed that this is a general rule of thumb and is subject to exceptions, in particular if certain people have been excluded for good reason.
He gave the example of a trustee excluding person ‘x’ on the basis that ‘x’ had been provided with a lot of financial assistance during his life, compared to the nominated beneficiaries.
“That would be acceptable, but if you said ‘x’ was in a same-sex relationship and I take [offence] to that, then to justify the exclusion of ‘x’ on that basis is probably… going to be seen to be unfair and an unacceptable basis for exclusion.”
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