The SMSF Association has identified death benefit disputes as being a major challenge moving into the future in a new paper, “Outlook for the SMSF Sector”, released today.
Compiled by SMSF Association head of policy Jordan George, the report predicts the number of individuals willing to contest the distribution of SMSF death benefits will rise as the members of these funds grow older.
The paper points out that, according to ATO statistics, 12.5 per cent of lump sums and 0.8 per cent of income streams were paid from SMSFs in 2015.
“These figures have the potential to increase substantially as the SMSF demographic ages and the transfer balance cap forces more superannuation money out of the system. With increased death benefit payments from SMSFs there comes increased potential for disputes and litigation over SMSF death benefits,” George noted.
“Already there has been a substantial increase in litigation over SMSF death benefits in recent years.”
He said the trend is in line with the experience of the Superannuation Complaints Tribunal (SCT) in recent years.
“The SCT cites 21.5 per cent of all complaints in the March 2017 quarter related to distribution of death benefits. This trend will continue and grow as more death benefits are paid,” he warned.
The paper cites the seeking of professional advice by trustees as an effective strategy to combat this phenomenon.
“SMSF trustees seeking specialist SMSF and estate planning advice is a crucial factor in mitigating the risk of death benefit disputes,” George said.
“Trustees need professional assistance in ensuring that binding death benefit nominations are drafted correctly and that SMSF trust deeds are structured properly to allow for appropriate succession of trustees so that death benefits are paid in accordance with the deceased member’s wishes.”