Practitioners' liability avoidable for estate planning 'disasters'

One industry lawyer has offered strategies to SMSF practitioners to avoid estate planning “disasters” and liability if a client faces issues with their estate and death benefits.

Speaking at the 8th Annual SMSF Adviser Strategy Day in Sydney last week, Ian Glenister, principal of Glenister & Co Superannuation and Estate Planning Lawyers, noted that it is the responsibility of an adviser that their trustee clients’ SMSF arrangements “dovetail” with the client’s broader estate planning objectives.

Practitioners should consider introducing a common deed in their SMSF practice, Mr Glenister said, for both convenience purposes and also to ensure their understanding of their clients’ deed is solid.

Mr Glenister also said that trustees should be implored on the basis of estate planning certainty and mitigated liability to use a corporate trustee structure.

“I have been in this space for many, many years now, and I can honestly say that I have never established an SMSF where there’s two members or more that was not a corporate trustee. Any client that has insisted that they wanted to be individual trustees, I’ve suggested that they seek and obtain advice somewhere else,” Mr Glenister said.

Practitioners should also insist that their clients have a current and valid power of attorney. He noted that if a member of an SMSF becomes incapacitated for a period that exceeds six months, the fund fails the definition of an SMSF and its assets lapse into the normal tax regime.

“Make sure the client also makes an enquiry and finds out whether the party that they’ve nominated to act as their power of attorney is prepared to act in that respect, because it’s not a legal requirement if you’re appointed someone’s power of attorney that you have to accept the decision,” Mr Glenister added.

Mr Glenister also stressed that practitioners should not be their SMSF clients’ attorney or executor, labelling it “marvellous ammunition as far as conflict of interest is concerned”.

Trustees should also have a valid, non-lapsing binding death benefit nomination, Mr Glenister said.

“If a client is going to have a non-binding death benefit nomination, why would you do it? Why would you have a non-binding death benefit nomination? It’s taking a shower with a raincoat on,” Mr Glenister said.

Finally, if clients don’t adhere to the estate planning advice they’re given, Mr Glenister said SMSF practitioners should issue their client with what he calls a “red letter”.

“In this letter, say, ‘We’re giving you this advice; for whatever reason you’ve determined not to adhere to that advice. When something goes wrong as a result of you not adhering to our advice, we will not be held responsible’,” Mr Glenister said.

“Make sure it’s not your fault.”

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