Lawyer sees spike in queries for SMSF estate planning, incapacity issues

Lawyer sees spike in queries for SMSF estate planning, incapacity issues

Following a surge in SMSF estate planning and incapacity issues, one estate planning lawyer has urged SMSF professionals and trustees to consider dual fund strategies and transferring assets out of the estate prior to death.

Australian Unity Trustees national manager of estate planning Anna Hacker said while estate planning for blended families can toss up issues in general, it can be particularly problematic where SMSFs are involved.

“People are always told, with SMSFs you get control and you can do what you want with it. The problem is that if you appoint the wrong people to help you and you lose capacity or you don't make sure that it's properly structured so that it can protect you when you do lose capacity, it's quite easy for people to come in and take control of it,” she warned.

“On top of that, [there’s often] a scramble to work out who can take control of the trusts and the super. It's a real minefield. I think it's something that we are going to see more and more, because people want to have that control when they have capacity but they're not thinking about what's going to happen if they lose capacity, and who they should put into those roles in the most appropriate way.”

Ms Hacker said SMSF professionals and their clients only have to look at cases such as Katz v Grossman [2005] NSWSC 934 to understand how easily one child can take control of the fund and act against the wishes of the deceased.

“With those sorts of situations, it’s not just where they lose capacity, it’s also after someone’s passed away,” she said.

One of the strategies that can be employed to help prevent disputes in these situations is to have two SMSFs, rather than a combined one, she explained.

“This goes against the reduction in costs and things but it will prevent you later from having that issue because it's separate, it's not going to have anyone else involved,” she said.

“It’s also becoming increasingly common to transfer assets out. You can’t do this in NSW though, because of notional estates, but in other states you can transfer assets out or have it jointly held with a child to actually protect it completely.”

Australian Unity Trustees general manager Emma Sakellaris said the financial advice industry went through a phase around 10 or 15 years ago of “setting up as many SMSFs as it could” and many of these clients are now reaching an age where issues such as incapacity are arising.

“There was definitely a phase where SMSFs were a fashion for a period, and those clients seem to have now reached their 60s and 70s and there are so many coming through now and it's very difficult to deal with them,” she said.

Lawyer sees spike in queries for SMSF estate planning, incapacity issues
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