Trustees should review their SMSF trust deed if they are intending to wind up their fund to determine if any restrictive clauses hampering the process need to be addressed, a technical specialist has said.
SuperGuardian education manager Tim Miller suggested this step is particularly important if the SMSF trust deed in question has not been drafted or amended recently.
“In the infancy of a lot of these deeds they didn’t contemplate trustee responsibilities and processes as well as they do now. So while I say check the deed, it’s more of a historical [warning because] I checked some really old ones and they were not very good in this phase,” Miller said during a technical webinar yesterday.
“And so just make sure your [fund deeds] are providing capacity for the trustees to make that decision [to wind up the SMSF].”
In addition to reviewing the deed, he noted unanimity among trustees was needed in order to proceed with the wind up of an SMSF, particularly given the increasing number of legal challenges in the space.
“You want all trustees to agree about the wind-up and document their decision. You really want to make sure the decision is documented and you’ve got the minutes to show that all parties have agreed to it,” he said.
“I’ve heard through some of the presentations [legal practitioners] have delivered about how to deal with rogue or disenfranchised trustees who aren’t willing to toe the line, so some of these decisions are going to result in [legal challenges] and higher legal costs.
“Again, by having the conversation upfront then maybe you can address some of those issues and do away with having to worry about the legal costs because [they] will just diminish the members’ balances.
“If you’re going to make the decision to wind up your fund, you want to get the best out of it and to get the best out of it you need to maximise your member balances.”