The rules governing estate planning in regards to SMSF assets can be applied differently compared to retail and industry superannuation funds and trustees should consider this factor in their planning, a legal expert has advised.
Townsend Business & Corporate Lawyers principal Peter Townsend noted SMSFs have greater flexibility regarding the rules, especially with regard to binding death benefit nominations (BDBN), but that this characteristic can be impaired if certain aspects of the Superannuation Industry Supervision (SIS) Act are adopted by the fund.
Earlier this month, SuperCentral self-managed superannuation executive consultant Michael Hallinan noted a number of legal cases had proved the SIS Act provisions around the three-year rule for BDBNs did not apply to SMSFs.
“Self-managed super is not subject to the three-year rule [for BDBNs], but some poorly drafted deeds do import the three-year rule [from the SIS Act] into the deed’s provisions,” Townsend said during a presentation today.
“Check to make sure that the deed has not imported the three-year rule into its provisions and be aware of the flexibility of a death benefit nomination in a self-managed context.”
He noted SMSF trustees also had the ability to change the operation of a death benefit nomination in line with the terms of the deed and make it binding or non-binding or a combination of both.
“Sometimes a non-binding nomination in respect of an amount for the surviving spouse can be more flexible, whereas if there is no surviving spouse, then the nomination of the children could be binding,” he said.
“In self-managed super, you can be very flexible with death benefit nominations; you can even put conditions in a BDBN to help protect your kids against the actions of their parents.
“You can make payments out of non-super assets in order to balance payments from the super fund that are taken tax-free by beneficiaries, so it is very possible to balance the two and be flexible.”
