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Caution required over off-the-shelf trust deeds

off-the-shelf deeds

SMSF trustees are advised to closely consider the use of off-the-shelf trust deeds as poorly written documents are at the centre of many legal disputes.

The growing popularity of SMSFs and the use of non-personalised, off-the-shelf trust trust deeds are key factors in many legal disputes, according to an estate planning and trustee services provider.

Equity Trustees estate planning national manager Marie Brownell said legal disputes related to trusts were increasing and one reason for this was the use of do-it-yourself or off-the-shelf trusts.

“A common issue we see with trusts is where someone has gone to their accountant to seek advice on how to minimise tax. The accountant then uses an off-the-shelf trust which is often not drafted properly,” Brownell revealed.

“Australians are a nation of DIY fanatics, but trusts are complex legal structures and not something anyone should create without specialist legal advice.”

These disputes extended to the SMSF sector as well and due to the ongoing growth in the number of SMSFs, “we are seeing more SMSFs challenging trust decisions as a result of trustees acting negligently, incompetently or even fraudulently”, she noted.

She referred to the case of Wareham v Marsella, in which the decision of an SMSF trustee who decided to pay a death benefit solely to themselves was challenged by the executor of the deceased member’s estate, as an example of how overlooked matters can cause issues.

“It’s often forgotten that superannuation death benefits do not automatically fall into the estate for distribution in accordance with the will. In the absence of a binding death benefit nomination, the trustee of the fund will decide who gets the benefit,” Brownell said.

“What’s usually overlooked is who that continuing trustee might be. If it’s someone who stands to benefit themselves, in a manner contrary to your wishes, then you need to carefully consider what steps you need to take to ensure your death benefit is paid as you intend.

“In order to establish a trust that is suitable for your current and changing circumstances, as well as those of your loved ones, always get proper legal advice, ensure you have a good succession plan for who is going to control the trust on death or incapacity and never sign anything you don’t understand.”

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