(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.

As usual, please contact me if you would like access to any of the content mentioned in this post.

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

Trust (Waltz) #2 – Trust Naming Conventions – Part II **

As mentioned in the last post, there are a myriad of approaches for creating any form of trust.

The first five profiled in this series are summarised below:

2nd Generation Family Trust (or a 'GST' – generation skipping trust) – this is an estate planning technique whereby assets are placed in trust for the benefit of grandchildren and later generations, rather than passing to the benefit of living children . From an asset protection viewpoint, the net unallocated assets in this type of trust should be outside the scope of a challenge to a deceased estate in states and territories other than NSW.

Lineal descendant, bloodline or capital reserved Trust – the deed establishing this type of trust typically limits the capital of the trust for the ultimate benefit of the specified beneficiaries (such as lineal descendants) but allows income distributions to a wider class of discretionary beneficiaries (such as spouses).

Estate Proceeds Trust – this is a trust established following the death of a parent of a minor child structured to qualify for excepted trust income tax concessions. Where there are two or more children to benefit from the estate proceeds income tax concessions, either a separate trust deed can be established for each child or a single deed is established benefitting all children.

Child Maintenance Trust – this is a trust established as part of a family law settlement which qualifies for the excepted trust income concessions. The main purpose is to fund all or part of the child support obligations associated with the upbringing of children. These obligations would otherwise be met personally in after tax dollars by the obligated parent.

Discretionary Trust – this is the most common trust, often referred to as a family trust. The trustee has a wide discretion to determine which of the beneficiaries are to receive the capital and income of the trust and how much each beneficiary is to receive.

Each of the above trusts is explored in View’s book – 40 Forms of Trusts – Workbook.

** For the trainspotters, ‘Waltz #2’ is a song by Elliot Smith from 1998