SMSF trustees who want their executor appointed to a fund to deal with the payment of death benefits should ensure its deed allows this action as superannuation laws cannot force the appointment of a replacement trustee.
Knowledge Shop technical superannuation adviser Jason Hurst said the ability of a legal personal representative (LPR), acting as an executor, to stand in for a deceased trustee was often assumed as the Superannuation Industry (Supervision) (SIS) Act permits that appointment.
“When a member passes away, section 17A 3(a) of the SIS Act allows for their LPR, or executor, to be temporarily appointed in place of the deceased member up until the time that death benefit is dealt with,” Hurst said during an online presentation today.
“Where people are often confused around this, and there have been a couple of court cases on this, is section 17A 3(a) allows the executor to be appointed, but it does not mandate them to be appointed. We still need the deed or the constitution to somehow allow the executor to become a director or a trustee.”
He pointed to the case of Ioppolo & Hesford v Conti [2013] WASC 389 in which Mr and Mrs Conti were in their second marriages and the children of Mrs Conti were her executor, and following her death wanted to be appointed as a trustee of their SMSF so they could have some involvement in the payment of the death benefit.
“The case found that Mr Conti didn’t have to allow that to happen. He was a surviving trustee and, even though they were executors, he didn’t have to allow them to become trustees and there was nothing in the deed that compelled him to do that either,” he said.
“So he changed the fund from having two individual trustees to a corporate trustee with him as the director and then had the death benefit paid out to himself.
“That was allowable because there’s nothing [in the SIS Act] that says executors must be appointed. It’s just states they can be appointed.”
