The person who assumes control of an SMSF upon the death of a trustee or member is the most important factor in guaranteeing the benefits of the deceased are distributed to the desired recipients, a specialist SMSF lawyer has said.
According to DBA Lawyers special counsel Bryce Figot, the matter of who controls the fund is more critical than having a binding death benefit nomination in place for estate planning purposes.
It means relying on trustee discretion outweighs the confidence SMSF members might have in a BDBN when they pass away.
“What are the pros of trustee discretion? You don’t know what the laws are going to be when you die, so if you’ve got the right person running the fund, someone you trust, they can take advice and do something flexible and appropriate at the time,” Figot told delegates at the 2018 Self-managed Independent Super Funds Association Annual SMSF Forum in Melbourne recently.
“What are the cons of trustee discretion? Well if you’ve got the wrong person running the fund, they might make a bad decision. Mind you, if you’ve got the wrong person running the fund, they might do something bad anyway.
“You don’t want to have the wrong person running the fund. You do want to be focused on who’s running the fund.”
He stressed having the right person in control of the SMSF outweighs all of the other common estate planning tools.
“If you’re happy with who’s going to be controlling the SMSF, do you really need to bind them?” he said.
“And conversely, if someone who can’t be trusted to run the SMSF is going to be running it, are they actually going to respect a BDBN that they don’t like?
“So in my personal opinion I’m not discounting binding death benefit nominations entirely, but I do think they are overused.”