Court orders issued to SMSF trustees in the event of a family split must be obeyed regardless of whether they have been drafted in a manner that will not lead to the intended outcome the parties involved are pursuing, a senior sector executive has said.
To illustrate the point, Accurium senior SMSF educator Anthony Cullen shared a situation he had previously encountered.
The scenario involved the separation of a couple who were both members of the same SMSF. The fund in question was forced to sell a property it held to allow the family split to be executed.
The court order issued stipulated the wife was to receive $250,000 from the proceeds of the sale of the property, however, it made no reference to the fact she had a separate sum of accumulated benefits of $250,000.
When the property was sold, the husband was informed his spouse would have to be paid $250,000 from the sale, being a share of his superannuation monies, as well as her own benefits of $250,000, and the SMSF’s liquidity was prohibitive to both amounts being settled.
Upon hearing of the situation, the husband claimed the court order had been drafted incorrectly and the intention was for the wife to receive only the $250,000 of her own benefits.
“[We had to inform him] that’s not what the court order said and we can’t process on what you think the court order is supposed to say. We can only base our process on what the court order actually said,” Cullen confirmed.
“The client ended up going back to their lawyer and eventually the lawyer actually got in contact with us and admitted that the court order was supposed to have stated that the sale of the property was designed to fund the wife transferring her own balance out of the fund.
“She was not supposed to get a split from the husband’s interest, she was only supposed to get her own interest, but he acknowledged that’s not what the court order stated.
“So even [if] everybody agrees that the court order is wrong, we can’t then just process it based on what it was supposed to say.
“[In this case] the lawyer actually had to go back and have that agreement redrafted to highlight what it was supposed to say.”
