SMSF practitioners neglecting vital step in estate planning
Despite persistent warnings, SMSF practitioners are continuing to miss one vital and basic step when setting up a binding death benefit nomination for their clients, according to MLC.
MLC Advice Solutions national manager of SMSF advice Peter Hogan told SMSF Adviser before clients make a binding death nomination it is vital SMSF practitioners ensure their trust deed actually allows for this, otherwise the nomination won’t be binding.
Mr Hogan said there have been a number of cases where SMSF trustees have failed to follow the rules set out in their trust deed and upon their death, the new trustee chose to ignore their wishes and pay another individual instead.
“As they haven’t exactly followed the rules of their particular trust deed, the court has then said the binding nomination wasn’t binding on the new trustees of the fund and has therefore upheld the decision of the new trustee to pay someone else,” he said.
Mr Hogan says this is therefore an area “requiring greater caution” on the part of SMSF advisers and accountants.
“There’s not enough attention being paid to what the rules are of a particular client’s SMSF in order to make sure a nomination is actually binding on future trustees,” he said.
“It’s one of the most common errors you’ll see.”
Mr Hogan said while improved education is reducing this problem, SMSF practitioners need to continue to be careful.
“The court cases have made it very clear that if you don’t follow the rules of your fund to the letter then the nomination is not binding on future trustees,” he said.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.