An industry specialist has warned advisers their clients need to follow proper legal procedures rather than ones that are more convenient when looking at the appointment or removal of SMSF trustees.
SMSF technical and education manager at Smarter SMSF Tim Miller noted this should be the case regardless of the processes allowable under the fund’s trust deed.
“When we’re talking about the appointment or removal of SMSF trustees, which is a fairly significant transaction, some deeds are very strict, [dictating] it has to be done by a deed of appointment and replacement so we actually have to go through the process of getting a document prepared by a lawyer to undertake that,” Miller told attendees of the latest SuperGuardian technical webinar.
“[This is opposed to] the trustee resolution. This is always a bit scary because from a trustee resolution point of view it means the trustees just prepare their own minute to appoint and remove the party.
“That might make things sound administratively a lot easier, but [it has to be asked] has everything been appropriately executed and I think they’re the areas people need to be mindful of. Just because the deed provides this avenue to simplify processes, is it better to go down that path or are we better off … going down the legal approach of having the original deed viewed by lawyers and then having the deed of appointment and approval performed by those same lawyers?”
He pointed out an area of consideration for trustees when faced with changing the control structure of an SMSF is how the process will affect any potential third-party dealings. This could involve banking transactions or interaction with conveyancers or the family law courts in the event of a relationship breakdown, he said.
“I know the pain points of potentially dealing with the banks when changing trustees [and] with death benefits [et cetera]. Sometimes they’ll just freeze the assets,” he noted.
“[So] it’s not just because something’s easy that we do it, it’s [about considering] what the ongoing consequences are so [trustee] resolutions may not necessarily satisfy the conditions.”
