A well-constructed trust deed could help avoid common disputes involving SMSFs, in particular those involving family members, according to a specialist law firm.
“SMSFs revolve around family members, which can make them extremely vulnerable to disputes that arise when members clash over money,” Townsend Business and Corporate Lawyers estate planning and superannuation special counsel Brian Hor said.
“Disputes are unpleasant and expensive. How long they are drawn out will depend on how well the provisions in the SMSF trust deed deal with trustee disputes.
“If they don’t, the trustees must act unanimously, which can result in deadlocks and an expensive trip to the courts for resolution.”
One simple inclusion that can help resolve SMSF disputes is the specification to allow for an odd number of trustees.
“If the fund has three members, two can outvote one. But a single member, like a corporate trusteeship, will have no disagreements, making a single-member SMSF the safest fund of choice,” Hor said.
“It is one solution to avoiding having a two to four-member fund where an even vote is more likely to occur.”
He pointed out the deed could include some specific dispute minimising provisions to manage those situations, such as allowing trustee decisions to be made by a simple majority and not unanimously, providing one trustee with a casting vote in the event of a deadlock, and ensuring voting rights were based on the asset balance of the trustee.
Typical dispute situations arising inside an SMSF included disagreements over the investments or the investment strategy of the fund, the payment of benefits and the payment of death benefits, he said.
