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Trust deed dictates death benefits

trust deed death benefits

The detail included in an SMSF trust deed requires examination to understand the procedures that need to be followed regarding death benefit payments.

A technical expert has recommended SMSF advisers check the conditions contained in their clients’ fund trust deed regarding the death of a member to ensure all required procedures are satisfied, which will in turn allow an expedient death benefits payment.

SuperConcepts SMSF technical and private wealth executive manager Graeme Colley explained often a trust deed requires the replacement of the deceased trustee with another individual before any death benefits can be distributed and this process in itself can be less than straightforward.

“With death benefits you might find that, in some cases, you need member resolutions [in order to replace a trustee, but] what we often get is trustee resolutions,” Colley said.

“[That’s really important because conflicts can] escalate in relation to the payment of death benefits out of the superannuation fund [if these conditions are not followed].

“If you’ve got a member resolution when you need a trustee resolution or vice versa [or if a member resolution has] been signed by the member in their capacity as a trustee rather than in their capacity as a member, then you’re going to run into some issues if there is some controversy there because it means the resolution is not consistent with the trust deed of that superannuation fund.

“That’s one of the big pitfalls we are seeing at the moment when you’re getting individuals who are being appointed as [SMSF] trustees.”

He noted these types of situations can be considerably more complex than would appear on the surface as was evident in a recent case presented to SuperConcepts.

In this situation, the deed of a two-member fund, established out of a blended marriage, required a member resolution to appoint a replacement trustee for a deceased trustee. Unfortunately, both members died at the same time.

“Both members of that super fund had passed away, [but] a member resolution [was required] to appoint the new trustee [and] that creates a real issue in those circumstances,” he noted.

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