Superannuation in Estate Planning. Michelle Meyer Consulting Principal

Transcription

1 Superannuation in Estate Michelle Meyer Consulting Principal

2 A form of trust constituted by a written trust deed or an Act of Parliament for the sole purpose of providing superannuation benefits: Superannuation Industry (Supervision) Act 1993 (Cth) s 62 Superfund governed by terms of Trust Deed and also by SIS legislation & regulations Settlor Trustee Beneficiaries SMSFs-over 500,000 (average bal $1mil) 2

3 Government has made it clear that your Superannuation Fund cannot be used to facilitate estate planning The sole purpose test, with the prescribed SISA investment restrictions, ensures the retirement income objective is paramount Member s benefit must be cashed out when the member dies (reg.6.21 SISR 1994) or an automatic reversionary pension must be in place TR2013/5 SMSF governing rules or terms of super income stream must specify person (or class of persons) to whom benefit will become payable & that it will be paid in the form of an income stream. Surviving spouse may be able to commence a new pension. 3

4 Will depend on: 1. The type of superfund-smsf 2. Who controls the trustee- Katz v Grossman 3. The terms of the superfund trust deed and rules- Donovan v Donovan 4. The type of death benefit nomination made, if any- Wooster v Morris 4

5 Superannuation death benefits are not automatically an estate asset. Leaving your super death benefits in your Will to your spouse or children will generally not be effective at law Deal with super under terms of SF trust deed and consider SIS Act & Regulations 5

6 Who can receive the death benefit? LPR or dependents, defined in s10(1) SISA as: Spouse or de facto Child (adopted, ex-nuptial but not step-child) Interdependency relationship-close personal & live together & financial & domestic & care Interdependency relationship- close personal & one suffers from disability. i. Who can receive the death benefit (s10(1)sisa)? ii. Who can receive death benefit and tax concessions (Div 302-D ITAA97)? iii. Who decides to whom to pay the death benefit? 6

7 i. Who can receive the death benefit (s10(1)sisa)? ii. Who can receive death benefit and tax concessions (Div 302-D ITAA97)? iii. Who decides to whom to pay the death benefit? Who can receive death benefit and tax concessions (Div 302- D ITAA97)? Death benefit dependents, defined at as: Spouse or former spouse Child of deceased under 18 Interdependency relationship existed just prior to death A dependant just prior to death. Not a child 18 or over who is not dependent Step-child ceases to be a child on termination of the relationship- ATOID 2011/77 7

8 i. Who can receive the death benefit (s10(1)sisa)? ii. Who can receive death benefit and tax concessions (Div 302-D ITAA97)? iii. Who decides to whom to pay the death benefit? Who decides to whom to pay the death benefit? Trustee of SMSF decides unless Member can and has made a valid BDBN Check terms of SF Deed BDBN v NBDBN, form, other requirements Does Reg 6.17A apply to SMSF Member s share in co trustee may pass according to Will, but during administration period, LPR holds the shares & can exercise any voting rights. Depending on constitution of trustee co & number of shares, LPR may be able to hold meeting & vote to remove or appoint directors. s17a(3)(a)sis-lpr may act as trustee or director of trustee co until death benefit is paid. 8

9 Super Disasters Katz v Grossman (2005) NSWSC Mr & Mrs Katz have two children Mr & Mrs Katz are trustees of their SMSF Mrs Katz dies and daughter is trustee in place of deceased mother Mr Katz signs DBN in favour of the two children equally Mr Katz dies Daughter appoints her husband as trustee & decides to pay entire super benefit to daughter Court does not interfere with that result as daughter validly appointed trustee and trustee had complete discretion. 9

10 Super Disasters Wooster v Morris (2013) VSC Mr & Mrs Morris members of SMSF BDBN completed by deceased in favour of his daughters from a 1 st marriage Mrs Morris advised BDBN not valid as didn t comply with SF Deed as delivery of DBN to trustee was required Mrs Morris paid death benefit to her SF account Application to SC referred to Special Referee- determined DBN was binding Proceedings before judge related to costs, int & quantum Held: Mrs Morris to pay daughters costs & that she lost right of indemnity as failed to act impartially & therefore acting in breach of trust 10

11 Super Disasters Moss Super P/L v Hayne (2008) VICSC Mr Hayne & de facto Ms Moss were Directors of PMS P/L which was trustee of SF. Each had own children. Mr H s Will divided estate equally between Moss and each of their children Memo of Wishes that super be paid into estate Executor purported to change trustee to a co under Moss sole control. As trustee she could decide on super death benefit. Issue: was super retained by SF (payable to Moss & deceased s kids but not kids of Ms Moss) or part of estate (payable to all kids) Held: Change of trustee ineffective (as POA held by original trustee co not Ms Moss as sole surviving member). Super death benefit remained in SF to be dealt with according to SF deed & Moss kids missed out. 11

12 Super Disasters Breadner v Granville-Grossman (2004) SF trust deed required exercise of power re BDBN to be done before closing date. BDBN executed one day late Issue: should Court interpret as on or before closing date. Held: no jurisdiction to grant relief re defective execution of a power as can only undo something which is done. So if don t exercise power at all or within time, Court won t interfere. 12

13 Super Disasters Donovan v Donovan (2009) QSC Dispute between 2 nd spouse Helga & daughter of 1 st marriage, Lynda Mr & Mrs Donovan were directors of co trustee of SMSF Trust deed amended to allow for BDBN Mr D wrote to trustee to inform of his wish that death benefit be paid to estate Daughter commenced proceedings contending letter binding on trustee Held: not binding as letter didn t comply with requirements of deed 13

14 Super Disasters Ioppoloo & Hesford v Conti (2013) WASC Mr & Mrs Conti trustees and members of SMSF Mrs Conti s Will contained wish that super not be paid to her husband but to her kids. No BDBN. Post death, Co Trustee appointed. Executor sought appointment as trustee. Held: while trust deed allowed executor to be trustee, it did not require this. Executor argued trustee did not exercise discretion in bona fide manner & sought review. Held: No evidence of this as co trustee could ignore wishes in the Will. Review of exercise of trustee s discretion denied. 14

15 superannuation when you the If the trustee is an individual If the trustee is a company 15

16 superannuation when you the When one of several individual trustees dies The other trustees can continue to act and can appoint a new trustee: TA s 6(2)(a) and (4)(b) The executor of the deceased person can act as a trustee of the superfund until the death benefits payable to the deceased trustee are paid: SIS Act s 17A(3)(a) 16

17 superannuation when you the Sole director of a single member fund trustee company dies Their executor can act as a trustee of the super fund until the death benefits payable to that person are paid: SIS Act s 17A(3)(a) The deceased director s executor may also appoint a person as the director of the company: Corps Act s 201F One of several directors of a trustee company dies The remaining directors can continue to manage the trust and appoint another director The executor of the deceased director can act as a trustee of the super fund until the death benefits payable to that person are paid: SIS Act s 17A(3)(a) 17