There has been a raft of legislative and regulatory changes that have occurred in the years since the Simpler Super legislation was introduced in 2007, said Topdocs director Michael Spakman.
These changes include amendments to limited recourse borrowing arrangements legislation, limitations on the type of insurance cover available to super members, and changes to concessional and non-concessional contribution caps.
“With the introduction of the Simpler Super legislation in 2007, a significant number of deeds were updated by advisers, but most have not updated their client’s deed since,” Mr Spakman said.
“Out-of-date provisions guiding the actions of trustees on any of these matters could result in significantly adverse effects on members’ benefits, and with the recent introduction of administrative fines for SMSF trustees, potential monetary penalties.”
Mr Spakman also noted that one of the provisions not covered in older trust deeds is non-lapsing binding death benefit nominations, meaning that some SMSF members may have inadvertently created three-year lapsing nominations.
“The implication of this is that many SMSF members may either already have an invalid nomination, or may die without a valid nomination if three years has passed since it was last updated,” Mr Spakman said.
“In this instance, the remaining trustees will have the power to distribute the member’s death benefits, and the manner in which they do so may be inconsistent with the member’s intentions.”
The role of the legal personal representative (LPR) of a deceased SMSF member has also changed, Mr Spakman said, with the acknowledgement now that the role of the LPR in protecting a member’s death benefits may be moot due to time taken to receive probate.
As an LPR cannot be appointed until probate is granted, a time delay of three months or more is not uncommon, he added, during which time the remaining trustees could have distributed the death benefits in whichever way they choose.
“Many older deeds use the LPR as a safeguard for a deceased member, but new alternatives such as a death benefit guardian, better protect the interests of the members of SMSFs,” said Mr Spakman.
“A death benefit guardian is a person appointed during the member’s lifetime who steps in immediately to protect the member’s interests on their death, therefore eliminating the timing issue associated with legal personal representatives.”