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SMSF - allowable beneficiaries?

Discussion in 'Legal Issues' started by KayTea, 24th Sep, 2015.

  1. KayTea

    KayTea Well-Known Member

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    For all the SMSF legal-eagles out there - a quick query (I hope):

    For my industry-based super fund, I have listed the 'executor of my estate', rather than my dependant child, as the beneficiary of my super fund (it's a long story, and I was legally advised to do so - for a very good reason).

    If I'm setting up a SMSF, can I do the same?
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes. But make sure you get the wording correct. One lawyer recently worded it wrong, on the advice on his accountant! And the death benefits ended up in the wrong hands.
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    'executor of your estate' is not good wording - what if you don't have an executor?
     
  4. KayTea

    KayTea Well-Known Member

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    How about my 'legal personal representative'? (I've just pulled out my retail fund binding nomination form, to check).

    My will lists two people as executors of my estate?……. I want them to make sure that my SMSF funds go where they need to (and I know that I can trust them to make that happen).
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Younneed specific advice as it will depend on the wording of the deed.

    Also make sure your will covers the super proceeds. Ideally this should be covered with a separate trust so as to avoid extra tax.
     
  6. KayTea

    KayTea Well-Known Member

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    I was told by a solicitor that a will can't cover super, as super isn't part of the estate - it needs to be binding nomination that determines what happens to super, as the will can't/won't do it. :eek:
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    But you want to direct it to your estate. It will then flow out according to your will or intestacy laws.
     
  8. KayTea

    KayTea Well-Known Member

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    Yep - that's exactly what I want. :)

    So, I want the SMSF to list the 'legal personal representative' to be responsible for receiving the funds, then my will dictates where it goes from there……

    It's just knowing exactly how to 'label' the beneficiary on the SMSF application that's the issue - is it 'legal personal representative', or 'executor of the estate'?
     
  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Thats what you should ask your lawyer.
     
  10. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    The SMSF will be affected by :
    1. The deed and
    2. Pension and/or other member binding or non-binding nominations and those documents
    3. Errors in 1 or 2 above (Simple errors are common ie nominating a adult child, invalidly completed, not using the correct expression for LPR etc). A significant number of SMSF document packages still contain binding nominations with onerous and unnecessary (?) witnessing requirements and even that follow the three year rule which may prevail and allow a binding nomination to lapse.

    4. The "lost document" problem. A binding nomination is useless if the surviving spouse doesn't know about it, or a trustee ignores it !! etc. Very important that SMSF issues form part of a broad estate plan and that a third party (lawyer ?) has copies.
     
  11. KayTea

    KayTea Well-Known Member

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    Thanks @Paul@PFI.

    I know that I can create a non-lapsing beneficiary nomination, and that I need to use Legal Personal Representative as the term. The fun part is finding the exact, correct wording to use - I've been doing a lot of research, and am struggling to find a definitive answer.
     
  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    It will depend on your trust deed. Look at the recent case of Munro v Munro
    Here is an article by DBA lawyers about it

    http://www.dbalawyers.com.au/smsf-deeds/another-bdbn-fails-due-to-poor-smsf-documents/

    A lawyer relied on legal documents prepared by an accountant and got it wrong.
     
  13. KayTea

    KayTea Well-Known Member

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    Thanks, @Terry_w.

    Geez, lawyers certainly earn their $$$ - that article is heavy going. The system is so damned complex, and there are so many places that errors can be made, that the average layperson would really struggle with trying to wrap their head around much of it.

    The problem is that the fees are so expensive (understandably so), making good legal advice out of the reach of many.

    It's a bit of a Catch-22…..
     
  14. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Lawyer fees aren't that expensive. I usually do BDBN for free for existing clients. Can't get much cheaper than that.
     
  15. KayTea

    KayTea Well-Known Member

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    Yeah, but you're not taking any new clients…….. :(

    Based on my reading of the article you supplied the link to, I think I need to change my setup to list the beneficiary as 'Executor of the Estate', and their relationship as 'Legal Personal Representative'.

    But based on some of the other reading and research I did earlier, and used to create the trust deed, just giving 'Legal Personal Representative' as the beneficiary was ok.

    Talk about confusing - I think I got it wrong…. :oops:
     
  16. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    You may not have an executor - even if you have a will not you may rescind it or it may be invalid etc. Probably the best would be "Legal Personal Representative" but you need to check you deed in case there are other phrases.
     
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  17. Scott No Mates

    Scott No Mates Well-Known Member

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    @KayTea - there are plenty of specialist wills lawyers around - perhaps @Terry_w could recommend one?
     
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  18. KayTea

    KayTea Well-Known Member

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    I do have an Executor, as my finances and familial relationships are a little 'complicated'.

    Once I get my hands on the deed, I'll check it out and see what is written.

    Thanks again, @Terry_w - your wealth of knowledge is amazing.
     
  19. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    You may have a will with an executor nominated now, but this may not be the case in the future when you die.
     
  20. KayTea

    KayTea Well-Known Member

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    If my will changes, then I'll change my SMSF deed to reflect that, when the will change happens. But for now, I'll just keep the will with the executor (which was only created a couple of years back - with no major life changes since then), and point my SMSF funds towards that.

    I'm assuming that I can change the deed when I need to (especially with only one trustee) - as I can't imagine that people need to be 'locked in' forever more once they've created the deed. Someone who creates a deed in their 20's is likely to go through a lot of life, and relationship, changes, before their 60's. I would expect that they can change their deed to reflect that.

    Trying to cover all my bases, at any one time, has become a bit like a bad movie. And, if the proverbial poop hits the fan, and the will or deed are contested, I won't be around to have to deal with it. As long as I know I've done all I can to make it 'work' while I'm still here is about the best I think I can manage.