Ensuring control of an SMSF after a member’s death requires careful planning as legislation allows for the appointment of a legal personal representative to make decisions for the deceased person, but the process is not straightforward and can change depending on the fund’s circumstances, according to a technical specialist.
“When we’re talking about trusteeship in the event of death, we need to work out what happens from a control point of view because the way the legislation is written is it provides for the ability to potentially appoint new trustees and have others come in to act on behalf of the member, but it’s not mandated and it’s not automatic,” Smarter SMSF education and technical manager Tim Miller said during a recent briefing.
“[There have been] many court cases where the surviving trustee ultimately holds the power to make decisions and the decisions of the trustee were final. For example, in Ioppolo v Conti, the daughters of the deceased ultimately did not have a legal leg to stand on with regards to the decisions that were made to pay out benefits.”
Miller added an exception within section 17A of the Superannuation Industry (Supervision) Act allowed for the appointment of a representative to act in the interests of a deceased member, however, considerations need to be made for the respective fund’s circumstances, including how many trustees are in the SMSF and the details of its governing deed.
“It’s a fairly restrictive appointment and it begins when the member passes away and ends when the death benefit commences to be paid in respect of that member. What you’ve got to look at in this situation and identify is [the timing of the] death benefit [and whether] it gets to be paid immediately,” he said.
“If you’ve only got an individual trustee, you do need to appoint somebody else, someone who isn’t the legal person or representative of the deceased member, to come in and act as the alternate or additional trustee of the fund.
“If you’ve got a significant member of a self-managed super fund who wants to make sure that they are represented in any decision-making that is undertaken, they need to make sure that the deed provides for their legal personal representative to be appointed in their place.
“When that legal personal representative is appointed, it then becomes a matter of understanding the voting and decision-making requirements of the fund.”
