Tuesday, July 27, 2021

(Quick) Succession** with super fund trusteeship on death

Recent posts have considered the various issues that can arise in relation to the payment of superannuation entitlements following death.

The case of Ioppolo & Hesford v Conti & Anor [2013] WASC 389 provides another example of how unintended consequences can arise where the control of a self managed superannuation fund (SMSF) is not carefully considered as part of a comprehensive estate plan.

The background of the case was as follows:

1) the husband and wife originally established an SMSF and were the individual trustees;

2) following the wife’s death, the husband appointed a corporate trustee (not the legal personal representative of his wife’s estate) of which he was the sole director and shareholder in order to comply with the relevant superannuation legislation;

3) the corporate trustee (with the husband as sole director), then resolved to pay the entirety of the wife’s superannuation entitlements to the husband, as opposed to her legal personal representative pursuant to her will;

4) the executors of the will sought to unwind the distribution, partly because of a direction in the will that related to the superannuation entitlements;

5) in particular, the executors argued that the husband failed to act in a bona fide manner because of the provision in the will.
In dismissing the executor’s claim and allowing the husband to retain all of the wife’s superannuation entitlements, the court confirmed that there is no obligation under the superannuation legislation for a surviving trustee to automatically appoint the executors of a former co-trustee as replacement trustees of an SMSF.

In many ways, the decision simply reinforces the principle from the Katz v Grossman case some years earlier.

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** for the trainspotters, the title today is riffed from the Elliott Smith song ‘Bled White’. View hear (sic):