SMSF trust deeds selected purely on a cost basis are increasing the level of risk an adviser takes on due to their lack of detail and sophistication in covering certain critical areas, such as estate planning, according to a specialist sector lawyer.
“What’s happening more and more is advisers are going cheap because they are succumbing to client pressure regarding competitive pricing, but in putting a trust deed in front of a client they are basically saying they’re happy with it,” DBA Lawyers director Daniel Butler told selfmanagedsuper.
“So the adviser is really wearing increased risk by putting forward a deed, which they say is appropriate and fits the purpose when it may not.
“What they should do is to look to have a suitable deed for their client base and make sure it is an appropriate deed because they could be liable for it, but not many advisers do that.”
Butler highlighted estate planning as one aspect cheap trust deeds did not properly address.
“We’ve found a lot of deeds very deficient in regard to estate planning. So in the event of the death, a lot of deeds say you’re out of there as a member. Indeed, you’re out of there as a trustee,” he said.
“But, if on death you’re out of there as a trustee or a member, how can anyone represent your interest?”
Voting rights within the fund was another potential area of concern with having a cheap deed in place, he said.
On this subject, he said cheap deeds might allow a situation where both members of a two-member fund had equal voting rights despite the fact one member was making 90 per cent of fund contributions and another only 10 per cent.
“In divorce or a death scenario you really do need to have examined these documents to know what they’re all about,” he said.
“People need to ensure they have these things covered in the deed. You can get very good quality, reasonably priced deeds, I’m not saying you have to pay the world for them, but you need to have a level of sophistication in the deed to deal with all of these situations.”
