Anderssen Lawyers' Successful October Seminar on SMSF Binding Nominations

Posted by: Richard Thompson

Richard Thompson and Kylie Wilson recently hosted a successful seminar entitled "Should you be drafting your SMSF Binding Nominations?".

It was a very popular seminar primarily attended by those in the financial planning and accounting industries. The attendees thoroughly enjoyed the presentation and further discussion surrounding the Munro v Munro case and took full advantage of having Richard Thompson as a presenter, being the lead lawyer on behalf of the Trustee in Munro. The attendees also enjoyed a presentation from Richard Williams, Counsel for the successful Trustee in the Munro case, discussing what was submitted in Court by both parties.

The seminar also discussed the possible ramifications of advisers and accountants preparing and settling SMSF Trust Deeds and Binding Nominations and the possible consequences of this if such documents were negligently drafted. Discussions were also had as to the attendees' professional indemnity insurer would cover them in preparing these legal documents.

This presentation was also timely since the announcement from Axis that it will wind down the Australian Retail Insurance Operations Axis Specialty Australia. The fact that Axis Australia has ceased "on new and renewal insurances of both accountants and financial planners from 8 October 2015" goes towards illustrating the difficulties that professional indemnity insurers are finding when it comes to the grey area of insuring accountants and financial planners who delve into the creation of legal documents such as SMSF Trust Deeds and/or the binding nominations.

As suggested at the seminar, it is imperative that all advisers and accountants review the public disclosure statement of their insurer to determine whether they would be covered in such an instance. In addition it is our view that they should be referring the drafting of any deeds and nominations to their solicitor.

The seminar was a true success not only from the content delivered but from the informative and collaborative discussions by all attendees.

Look out for the next seminar presented by Anderssen Lawyers in the near future.

If you wish to discuss the terms of any SMSF Trust Deeds or binding nominations, please do not hesitate to contact Kylie Wilson on 07 3234 3102 or Richard Thompson on 07 3234 3113.

Planning Reform in Queensland

Posted by: Megan Tilbrook

As many of those who work in the industry will know, the Queensland government is planning to bring yet further changes to this area of law with the draft Planning Bill 2015 being released for public consultation in early September this year. Some of the key changes being made to the legislation include changes to chapter 3 regulating development assessment including changes to the types of development and the process for assessing applications.

Further information in relation to the planning reforms can be found at the following website: www.dilgp.qld.gov.au/planning-reform

If you propose to make a submission in relation to the draft bill the closing date for consultation is fast approaching with all submissions to be made by 6pm, 23 October 2015.

As the process progresses we will be providing further details on the changes and the potential impacts they will have in practice.

Is your SMSF Trustee automatically bound by your valid Binding Death Benefit Nomination?

Posted by: Richard Thompson, Litigation lawyer explains with a peculiar case study...

The primary lesson learnt from the Supreme Court of Queensland's judgment of Munro v. Munro is that one must apply legal considerations in determining whether a particular BDBN is validly completed in accordance with the terms of the Deed.

But what happens if the Deed itself contemplates a BDBN but precludes the Trustee from being bound by such document?   

In the following case study, we show how important it is to consider the legal ramifications of the terms of an SMSF Deed well before executing a BDBN.

CASE STUDY

"Mr & Mrs Brown (second marriage) engaged a top tier law firm to draft and execute a Deed of Variation to the Self Managed Superannuation Fund Deed.  

Mrs Brown, who is receiving a pension from the Fund, validly enters into a BDBN nominating her children as the beneficiaries. 

Mrs Brown passes away, leaving Mr Brown as the sole Trustee and in charge of distributing Mrs Brown's superannuation account.  Is Mr Brown required to pay the benefit to Mrs Brown's children?

The Deed of Variation allowed, via Rule 6.4 of the Deed, for a Binding Death Nomination form to be executed and provides, within the deed, the prescriptive form that the Nomination must take.  Mrs Brown, as stated above, had complied with such requirements.

However, Sub- Rule 6.4(e) directs that where a member dies whilst in receipt of a pension, the benefit payable on that member's death will be governed by the appendix to the Trust Deed (not rule 6.4).  Therefore the provisions of the appendix will overide a Binding Death Benefit Nomination prepared in accordance with Rule 6.4 where the relevant member is receiving a pension from the Fund.

The Appendix provides that the Trustee "may" pay a lump sum to a person identified in accordance with Rule 6.4 or pay a reversionary pension to any one or more of the dependants of the deceased member in accordance with the relevant clause.

Accordingly, when read in conjunction with Sub-rule 6.4(e), Mr Brown retained a discretion on the death of Mrs Brown as a pension recipient that could override the Binding Death Benefit Nomination prepared by Mrs Brown in accordance with Rule 6.4 of the trust deed.

Therefore, legally, Mr Brown could use his discretion and not pay Mrs Brown's benefit to her children and decide to pay it to Mrs Brown's dependants, which would include himself.

Whilst the Nomination Form was completed in accordance with the Deed (unlike in Munro), the issue lies in the enforceability of the Nomination, which was obviously not the client's intention when engaging the firm to prepare the Deed.

Left unchanged, this could have had significant adverse consequences for the deceased's children had the nomination not be enforced by the Trustee.

Fortunately, Mr and Mrs Brown attended Anderssen Lawyers, we reviewed the deed, recognised the issue and had the clients sign a further Deed of Amendment to ensure that the nomination will at all times in the future be binding on the Trustee, subject to it being deemed a valid Nomination as is the usual course.

Our view of this provision, when read in conjunction with Sub-rule 6.4(e), is that the Trustee retains a discretion on the death of a pension recipient that could override any Binding Death Benefit Nomination prepared in accordance with Rule 6.4 of the trust deed, even if a BDBN could be validly prepared in accordance with the requirements of that Rule. 

To avoid such an issue for yourself or your clients, contact our Succession / Superannuation Team to allow us to review your Deed or Nomination and provide our position as to whether amendments are required – all free of charge. 

If you have any dispute in relation to a Deed or Nomination, contact our Litigation team for a free, no obligation chat about your situation.

Richard Thompson is an experienced solicitor in the area of Trust Deed disputes and forms part of the Litigation team and Succession/Superannuation team of Anderssen Lawyers.

Richard Thompson, together with team leader Kylie Wilson, will be presenting a seminar this Thursday afternoon entitled "Should you be drafting SMSF Binding Death Nominations?".  There are limited spaces available – to register for this event please click here.