Administration, Estate Planning, SMSF

Caution needed with multi-purpose deeds

SMSF Will BDBN binding death benefit nomination Deed DBA Lawyers SMSF

SMSF practitioners should carefully examine deeds that are designed with multiple features as these could potentially complicate estate planning matters for a fund.

An SMSF lawyer has warned against the use of multi-purpose deeds with built-in estate planning provisions, noting they are unnecessary and likely to complicate matters for the fund upon the death of a trustee.

“We have seen a number of deeds that provide multiple options to the client. The options might include an SMSF will, a binding death benefit nomination (BDBN) which is lapsing or a non-lapsing BDBN,” DBA Lawyers principal Dan Butler told attendees at The Tax Institute’s recent Super Intensive.

“These multiple options, in my view, are a recipe for disaster. As a lawyer I can only recommend you keep it simple.

“A number of these suppliers encourage you to get into these complex documents with multiple options, which is really a recipe for things going wrong. It concerns me that we have got these poor-quality documents out there and issues such as unproven SMSF wills.

“If we look at the simple cases of BDBNs, how many of those have hit the courts and how many are being dealt with on a day-to-day basis by law firms like ours and other advisers where things are in dispute?

“So my recommendation is if you look at your deed, have you got those multiple options? [If so], I’d be wanting to get it reviewed and revised.”

Beyond checking an existing deed for conflicts and irregularities, he urged practitioners to consider implementing a routine practice of reviewing and revising the deed if needed.

“We would generally recommend you consider a five-year cycle. That’s on a quality deed. If it’s not a quality deed supplier, and particularly from an unqualified supplier, I would think it would be wise to get that [deed] reviewed even more frequently than a five-year cycle,” he said.

“Sure, our deeds can last 10 years, maybe longer, but it’s an appropriate measure for the adviser to have a regular suite of up-to-date deeds.”

He added taking this course of action is crucial given the dynamic and ever-changing nature of the superannuation landscape.

“If you have a client with a deed prior to mid-2017, I would consider having that reviewed and updated. There have been many changes since mid-2017,” he said.

“We’ve had many changes with pensions, with the transfer balance cap, with total super balances changing because of the Division 296 tax, we have differences in release authorities and Division 293.

“There’s so much change on an ongoing sense that generally a five-year mark is where we have recommended where an update should be considered.”

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