Trustees should ensure their SMSF trust deeds provide members with the option of nominating a replacement trustee and not assume a legal personal representative (LPR) will be appointed automatically in the event of a member’s death, an SMSF expert has said.
Smarter SMSF chief executive Aaron Dunn said while section 17A(3)(a) of the Superannuation Industry (Supervision) (SIS) Act 1993 allowed for an LPR to replace a deceased member in the role of trustee or director, it was important for trustees to note this was a permissive requirement rather than a mandatory one.
In a blog post on the Smarter SMSF website, Dunn said potential future conflict in the event of a member’s death could be avoided if the fund’s trust deed provided members with the option of nominating a replacement trustee.
“Many deeds will simply follow the requirements within section 17A(3)(a) of the SIS Act, which can ultimately pose some potential future risks with succession and control of death benefit payments – in particular, where there is no valid binding death benefit nomination in place,” he said.
Trustees would benefit from having a trust deed that allowed for a deceased member’s LPR or another party nominated by the member to act as a replacement trustee, he added.
He also highlighted the decision by an individual consenting to be a replacement trustee would need to be reported to the relevant regulatory body within the given time frames.
“It is not always necessary to have to appoint a replacement trustee in the event of death, in particular where the surviving member is also a trustee/director and beneficiary. There are, however, other times where the clarity of such appointments will be absolutely critical to seeing out the wishes of the deceased member. And that’s where you simply can’t leave such matters to chance,” he said.
His comments follow the recent case of Dawson v Dawson, which hinged on the role SMSF deeds play in trustee appointments.
