SMSF trustees looking for an independent third-party to act as executor or attorney for their estate plans should avoid using public trustee services run by state or territory governments as it could lead to breaches when settling a death benefit dispute, a specialist superannuation lawyer has stated.
Cooper Grace Ward associate Sarah Camm cautioned SMSF advisers about relying on government-run trustee services while speaking about the case In the matter of Gainer Pty Ltd [2024] NSWSC 1138 at the law firm’s recent Annual Adviser Conference in Brisbane.
Camm said the case related to an SMSF where the last member died and months later their lawyer, who was acting as their executor, also passed away, resulting in the execution of the will being handed to the New South Wales Trustee and Guardian.
“The New South Wales Trustee and Guardian, in its capacity as administrator of the estate, took control of the shares in the corporate trustee of the SMSF and appointed Tim [an independent third party] as the director of the corporate trustee,” she said.
Cooper Grace Ward partner Clinton Jackson noted this action breached section 17A of the Superannuation Industry (Supervision) (SIS) Act in regards to membership of the SMSF.
“With section 17A we know the rules. Every member must be a trustee or a director of the corporate trustee and every trustee or member must be a director. We have that saving rule that allows an attorney to act in the place of a member as a director or a trustee,” Jackson said.
“Tim wasn’t any of those things. He was not an attorney under an enduring power of attorney and was not the executor or the administrator of the estate, so he was not a legal personal representative, so that meant the fund didn’t comply with Section 17A.
“The issue with section 17A is there is no discretion [from the ATO]. You either do or do not comply.
“So Tim continuing in that role was a big issue for the fund and it could have resulted in significant penalties had the fund continued to operate past the six-month window of having the right trustee in place.”
Camm and Jackson added the case highlighted that state trustee services do not want to be involved in complex SMSF estate disputes, which is why Tim, as a professional trustee, stepped in to administer the fund.
“Quite frequently, the state trustee doesn’t want to be the trustee of every single superannuation fund, family trust and so on when they are appointed an administrator of someone’s estate just because that person has died or can’t make financial decisions or doesn’t have an enduring power of attorney,” Camm said.
Jackson added: “The same issue applies in Queensland where the public trustee doesn’t want to take on those roles when they are the executor or administrator of an estate.
“We have lots of issues trying to get them to deal with a fund because people often use them as a back-up, but we do try to steer them away from there.”
