Addressing DBA’s recent Succession Planning Day in Sydney, the law firm’s special counsel, Bryce Figot, said while the idea of starting a new SMSF to insure trustee assets against a challenge after death often “does not get much airtime”, it was a more secure option from a legal standpoint if a trust deed had gone missing.
“If there is a question mark about the document trail because the deed is lost, the most popular option is to put in place a confirmatory deed and get everyone who might one day contest to sign and agree that these are the rules to govern the fund,” Mr Figot said.
“But I would have far more confidence in starting a new SMSF and rolling the benefits into it, because the confirmatory deed is somewhat untested. Whereas I would describe starting a new SMSF as rock solid, short of getting an order from the Supreme Court, which clients never want to do because it’s expensive and there is sensitive information that might be made public.”
Mr Figot said while the administrative challenges of switching funds were not ideal, in the long term the process could provide peace of mind for trustees that their arrangements could not be challenged down the line.
“There are things to consider like CGT, stamp duty and section 66 of the SIS Act around acquiring an asset from a related party — they could all make this a difficult proposition,” he said.
“But in the hands of the new fund, [the assets] are squeaky clean. I’ve never seen a disgruntled beneficiary say, ‘Where did the SMSF get the money from in the first place?’ I’ve never seen a death benefit dispute go to that level of minutiae.
“Confirming a deed is an option and it gives you a leg to stand on, but wouldn’t you rather have a tripod to stand on?”
