Death benefits

SMSF will validity in question

SMSF will

The Hill v Zuda case has raised questions about the value of SMSF wills while confirming BDBNs do not expire after three years in an SMSF.

The effectiveness of having an SMSF will has been brought into question due to the High Court ruling in the Hill v Zuda case, a superannuation lawyer has said.

DBA Lawyers special counsel Bryce Figot pointed out the facts of the recent case not only confirmed binding death benefit nominations do not automatically have a three-year limit for SMSFs, but reflected this fact as well.

“Recall the following facts from Hill v Zuda. Remember the deed was amended by an amending deed which inserted a [particular] clause. Remember that? Was that done so they could say ‘well it’s not the notice binding the trustee, it’s the governing rules themselves binding the trustee’?” Figot said during a presentation at the recent SMSF Association Technical Summit 2022 held on the Gold Coast.

He revealed the argument about the notice having bound the trustees to a particular course of action was used during the case.

“’The distinction between a requirement imposed on the trustee by the deceased during his or her lifetime as permitted by the governing rules and the requirement imposed on the trustee by the terms of the governing rules themselves, that is a real one,,’ [the trustees said] in their submission to the High Court,” he said.

“What did the High Court say to that? It didn’t even require a stand-alone sentence to dismiss it.

“So when people push things like SMSF wills or SMSF death benefit rules if there is no substantive difference but they are purported to [provide] a silver-bullet solution, I’m not saying it won’t work, but consider yourself on notice.

“[That’s] because the idea of what those things were supposed to be, that they would avoid controversy and litigation, well this case still went to the High Court and you see the High Court dismissed it.”

He noted in his opinion the court’s decision demonstrated it is not really of any value to have an SMSF will in place.

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