Stock documents proven unsuitable

SMSF bespoke documents

The repeated use of the same trust or binding nomination document is untenable after a recent court case proved the value of a bespoke document.

The use of off-the-shelf trusts and binding death benefit nominations (BDBN) should come to an end, with each SMSF being supplied with bespoke documents created by legal professionals, according to a lawyer.

Cooper Grace Ward partner Scott Hay-Bartlem said the recent Hill v Zuda case confirmed the primacy of the SMSF trust deed as the defining document in terms of directing death benefits via a BDBN and that specific regulations do not apply in the case of SMSFs.

“SMSF BDBNs are not subject to [Superannuation Industry (Supervision)] regulation 6.17a and the High Court said this was right, which means we must always follow the trust deed,” Hay-Bartlem said during a recent webinar.

“As lawyers we think differently than normal people and often we argue with individuals or with advisers saying the deed does not work and has a problem.”

Hay-Bartlem said some advisers are unable to identify those problems and use common documents for many SMSF clients.

“Many times I have had advisers tell me ‘I just use the same form I have from other SMSF clients’,” he said.

“No, every trust deed has to be prepared individually and sometimes it is a weird provision hidden in a strange place that will catch you out.

“As lawyers, when it comes to someone dying, we are pulling these things apart like you wouldn’t believe.”

Cooper Grace Ward senior partner Clinton Jackson said the risk of legal action around poor documentation had increased and was being sought out in some cases.

“The worst thing about poor documentation is that estate litigators are now alive to this issue,” Jackson said.

“If you go back five years, a few of them might have been, but the state of documentation now is almost the first question that is asked so if there are any discrepancies in your binding nomination, that is likely to be pulled up these days.

“Unfortunately, we have numerous clients that have gone and done perfectly good estate plans put in place by their advisers at the time, but unfortunately they will not work to achieve the result they’re looking for.”

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