SMSF and Estate Planning

Jan 15, 2014 | Personal Wealth, SMSF

Simon Flowers
A self managed super fund is an excellent tool for estate planning when things are done correctly. When things are not done correctly or poor documentation is in place this can go unnecessarily wrong with potentially drastic consequences.

Our firm was involved in providing expert witness advice for a Victoria Supreme Court case in relation to what some commentators are saying as “the most important SMSF succession planning case to date”. The case deals with several issues which need to be considered in relation to what is the first or second biggest asset of a person.

The facts of the case were as simple as:

  • Husband dies in Feb 2010,
  • 2nd wife was an individual trustee of the fund with the husband,
  • Husband had 2 adult daughters of husband first marriage,
  • 2nd wife had a son to her first marriage,
  • Husband completes binding death benefit nomination in favour of daughters,
  • 2nd wife added son to trustee and then changed trustee to a company,
  • The second wife chose to ignore the husband wishes and the binding death benefit nomination and instead paid a pension to herself from his super monies.

The case was a simple one (regardless of the convoluted facts) and in the end the right answer was the result – the girls won. However, after significant legal fees and about 3 and half years of court battles, the court battles took its toll on all parties. The 2nd wife died at the end of the case and about 40% of the money the husband had in super has been eaten away through legal fees. The 2nd wife died as a bankrupt with no way for the daughters to get some of the money back.

So what does this case tell us:

  1. Make sure everyone knows about the binding death benefit nomination and that it is completed correctly
  2. Make sure your Will discusses and makes account for what you want to happen to your super and who controls your self managed super fund on your death
  3. Make sure your reversionary pension documents agree with your binding death benefit nomination
  4. Make sure you have an up to date trust deed which allows for what you want to do
  5. Make sure you get expert superannuation and legal advice.

Contact your LBW representative if you would like any assistance.

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