Sent: 15-03-2011 10:39:02
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Binding Death Benefit Nominations
At the recent SMSF Professionals Association of Australia's Annual Conference, Mr Paul Slattery QC delivered a very interesting paper on Binding Death Benefit Nominations.
His paper specifically looked at SMSFs only however he acknowledges that many of the issues he raises could easily apply to APRA regulated super funds.
He argues that there is "very little justification for creating a separate set of rules and structures for dealing with the assets of a deceased ... whether they be superannuation or otherwise".
He also argues quite persuasively that the three year binding nomination rules apply to SMSFs (which is counter to the views of the ATO expressed in a SMSF Determination in 2008. It will be interesting to see if his views lead the ATO to express a different opinion. In any case I hope his paper sf presented at a National Tax Liaison Group Super Technical Sub-group Meeting so that the ATO is given the chance to formally respond to it.
His paper gives a fascinating example of a deceased man's second wife arguing with his two children from his first marriage. He estimates that around Australia about 1,800 cases similar to the complexity mentioned in his example. This is a lot of potential litigation.
He observes that most SMSF trust deeds are poorly drafted and that, in time, this will cause considerable problems.
In addition, "moreover , when one looks closely at any trust document it behoves the reader to look closely at the words of the document and not, too quickly, come to a conclusion about them."
How many people who work in superannuation can honestly say they already follow this suggestion, or indeed will follow it?
He wonders if a solution may be for the government to legislate for a minimum standard death benefit nomination. However Slattery thinks that it's difficult to see the Commonwealth Parliament legislating in this way. Personally I'm never in favour of big brother solving anything adequately.
We need Slattery says a "completely different trust deed drafting approach" especially in relation to the requirements to implement a death benefit nomination.
He concludes, "It is also my opinion that unless there is a significant change in the drafting approach to SMSF trust deeds... SMSFs will soon become embroiled in litigation of the type that has dominated the lives of those who practice in the area of wills and estates. That tragic result must be avoided by the application of further attention to detail, common sense and a willingness of Parliament to legislate in a complementary way."
Well the challenge has been made. Is the legal profession up to this challenge? It remains to be seen. The reality is that there are very few solicitors who actually understand superannuation. We all know that the Parliament rarely gets legislation absolutely on the money and this will probably never change.
Finally please consider purchasing a copy of "A How To Book Of Self Managed Super Funds". You can look at the contents page at the following link: http://www.atcbiz.com.au/r.php?r=0mjd6ne
The 4th edition was released just before Christmas.
For details of the changes made from version 3 to version 4 visit: http://www.atcbiz.com.au/r.php?r=8mz1024
As you'll see from the list there have been many changes.
Two purchase options are available - once only subscription - $55 inc GST - or an annual subscription will gives you access to all the updates made throughout the year ($120 inc GST). The book can be purchased at the following link: http://www.atcbiz.com.au/r.php?r=5a4agqb
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