Administration, BDBN, SMSF

Multi-purpose deeds require caution

Trust deed Multi-purpose BDBN SMSF

SMSF trust deeds covering multiple parameters for certain actions of the fund need to be given particular attention from a compliance perspective.

An SMSF lawyer has warned against the use of trust deeds featuring multi-purpose provisions as they are unnecessary and likely to complicate estate planning strategies.

“We have seen a number of deeds that provide multiple options to the client. The options might include an SMSF will, a binding death benefit nomination (BDBN) which is lapsing or a non-lapsing BDBN,” DBA Lawyers principal Dan Butler observed.

“These multiple options, in my view, are a recipe for disaster. As a lawyer I can only recommend you keep it simple.

“A number of these suppliers encourage you to get into these complex documents with multiple options, which is really a recipe for things going wrong. It concerns me that we have got these poor-quality documents out there and issues such as unproven SMSF wills.

“If we look at the simple cases of BDBNs, how many of those have hit the courts and how many are being dealt with on a day-to-day basis by law firms like ours and other advisers where things are in dispute?

“So my recommendation is, if you look at your deed, [determine if it has] those multiple options. [If it does] I’d be wanting to get it reviewed and revised.”

Further Butler pointed out regular review of trust deeds is sound practice without having situations like this necessitate the exercise.

“We would generally recommend you consider a five-year cycle. That’s on a quality deed. If it’s not a quality deed supplier, and particularly from an unqualified supplier, I would think it would be wise to get that [deed] reviewed even more frequently than a five-year cycle,” he said.

He added taking this course of action is crucial given the dynamic and ever-changing nature of the superannuation landscape.

“If you have a client with a deed prior to mid-2017, I would consider having that reviewed and updated. There have been many changes since mid-2017,” he explained.

“We’ve had many changes with pensions, with the transfer balance cap, [and] with total super balances changing because of the Division 296 tax.

“There’s so much change on an ongoing sense that generally a five-year mark is where we have recommended where an update should be considered.”


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