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Self Managed Super Funds

Do you know what your self managed superannuation trust deed provides should happen upon your death?  Who will decide where amounts standing to your credit will be paid?  If you are a trustee, who will replace you?

Many trust deeds give very broad discretion to the trustee in relation to a wide range of matters including who receives a member’s benefit on the death of that member.  This may be appropriate when you are either one of the trustees or control the trustee, but may cause difficulties following your death.

The NSW Supreme Court case of Katz v Grossman decided in 2005 illustrates the type of problems that can arise upon the death of the person who establishes the super fund.  In this case, Mr Katz and Mrs Katz were the only members and trustees of the E Katz Employees Trust (“the Fund”) which was a self managed superannuation trust.  Following Mrs Katz’s death, Mr Katz, who was the sole beneficiary of Mrs Katz’s will, appointed his daughter Mrs Grossman as an additional trustee of the Fund.

Mr Katz died and probate of his will was granted to Mrs Grossman and his son.  Prior to probate being granted, Mrs Grossman appointed her husband as a trustee of the Fund and it was this appointment which led to the son’s challenge.

The Court found the appointment was valid which resulted in the daughter and her husband as trustees having the discretion to decide where the assets of the Fund were to be applied.

If Mr Katz had expected that his estate would receive his entitlement from the Fund and be distributed in accordance with his will, the fulfilment of such an expectation now relied on his daughter and her husband exercising their discretion as trustees to distribute the Fund as if it were an asset of the estate.  Given that Mr Katz’s son brought the proceedings against his sister, he must have doubted that this was likely to occur.

The solution to problems like this and where Harris & Company can help, is to tailor your superannuation deed to spell out what should happen on your death.

For example, if the Katz deed provided that upon the death of the last of Mr & Mrs Katz, then the trustees would be the son and the daughter and that any benefit standing to the account of the survivor must be paid in specific shares to that member’s dependents, then Mr Katz’s wishes would have been achieved.

Harris & Company can provide advice about tailoring your deed to your specific requirements. Amendments to your deed may relate to admission of new members, how the trustee is changed and what happens on your death.

Amending the deed is more efficient than repeatedly making binding death nominations to ensure the assets of the fund are distributed on your death in the way you want.  Given that superannuation assets may comprise a large part of your assets on death, a review of your superannuation deed should be part of your estate planning.

For further information regarding  self managed super funds, please contact Ian Smith.

This publication is intended only to provide a summary of the subject matter covered. It does not purport to be comprehensive or to render legal advice. The publication reflects the law at the date the publication was written which may differ at the date the publication is being read. No reader should act on the basis of any matter contained in this publication without first obtaining specific professional advice.
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