As people have become more aware of the riches held in self-managed superannuation accounts, they are becoming more inclined to look beyond the traditional estate assets and seek ways to challenge SMSF trust deeds, lawyer Scott Hay-Bartlem says.

“I think people are getting smarter about where the money is held and more aware that there is money outside of estates,” he explains.

Hay-Bartlem is a partner at Cooper Grace Ward in Brisbane who specialises in tax, superannuation, estate and succession planning. Over the last few years, he says, people have become attuned to the strategies commonly used to try to stop estate challenges. As an alternative, people often look for errors and inconsistencies in SMSF trust deeds to gain a foothold onto the deceased’s assets.

Hay-Bartlem will be speaking at the upcoming SMSF Association National Conference in Melbourne in February, in a session titled: “Is your documentation up to it – the next frontier of SMSF and estate disputes.”

“When there’s a dispute now, it’s less about what’s in the estate and people saying they want more money, and more about looking at things that are held outside the estate,” Hay-Bartlem notes. “SMSFs are particularly in focus, as people are looking more and more at how they can challenge where the superannuation will go.”

Hay-Bartlem says challenging the payment direction of a deceased SMSF can be easier, “in certain circumstances”, than disputing someone’s estate. The reason, he explains, is that there is often greater scope for errors and mismatches of information in trust deed documents than there is in wills and estate plans.

Accordingly, he stresses the importance of ensuring deed variations match up the relevant details from previous updates.

“What we’re saying to people is that we need to be very careful to make sure all our SMSF things line up,” he says, “because the best planning can be undone if there is a problem in the SMSF documents.”

Hay-Bartlem says deceased SMSF issues have evolved; “five or 10 years ago”, people focused on whether their death-benefit nominations were effective, he says, whereas in the last two or three years, the real concern has become consistency and accuracy of information.

“The pension documents are a really good example,” Hay-Bartlem says. “Twenty years ago, pension documents were pretty scant and no one paid much attention to whether they were properly reversionary.

“Things come and go in waves and fashions in the SMSF world, for really good reasons, but right now we’re seeing a real focus on making sure it’s all going to work as the client intends.”

While Hay-Bartlem admits lawyers “think about these things differently” than advisers, he says advisers need to make sure they read the deeds of their clients, and “ensure that what they’re doing follows the deed to the letter”.

“We’re seeing a lot of people not reading the deed correctly and not understanding the provisions, or not being able to prove that all preconditions or requirements in the deed have been fulfilled,” he says. “That’s where you get problems down the track.”

 

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Tahn Sharpe is a Sydney-based financial services journalist with a background in financial planning. He writes on advice, superannuation, investment, banking and insurance issues, is a certified SMSF Adviser and holds an Advanced Diploma of Financial Planning.