The goal of good estate planning is to avoid arguments after someone’s death, Scott Hay-Bartlem, a partner at the Cooper Grace Ward law firm and SMSF Association specialist told the 2016 SMSF Association technical conference.
“When estate planning works, it’s when there are no disputes when someone dies. This outcome is best achieved by understanding that when it comes to estate planning, there is ‘no one fits all size’ solution.
“What I tell advisers is that they must devise solutions that best suit their clients’ individual circumstances. Every family is different, so as advisers we must work together and with the family to work out the solution that best fits their circumstances. And if there is a self-managed super fund (SMSF) involved, then that must be part of the overall estate plan.”
Hay-Bartlem says the first question to ask when estate planning involves an SMSF is whether giving the surviving trustee or trustees discretion to determine the recipient of a death benefit in the SMSF is the best answer.
“There are many instances, in my experience, when letting a trustee make the decision after death is the best answer, so we can make the right decision with the benefit of hindsight. Being able to decide the appropriate course after death should not be thrown away lightly.
“Equally there are situations where allowing the trustee to choose as they please after death is not going to achieve the result the client wants, and then we need to work out how best to remove the trustee’s discretion and lock in the decision.
“If fund members decide to choose a binding death benefit nomination (BDBN), then it’s absolutely vital to follow the deed precisely, or else the BDBN can be useless. There are a multitude of factors in deciding who to nominate under a BDBN,
including whether the recipient is likely to be sued and the risk of an estate challenge.
“It’s also worth remembering there are other alternatives to BDBNs – whether a pension should be reversionary (making sure there is good documentation to support that), tailoring the trust deed and having separate SMSFs,” he says.
