{"id":5951,"date":"2022-06-02T12:00:43","date_gmt":"2022-06-02T12:00:43","guid":{"rendered":"https:\/\/www.tagfinancial.com.au\/blog\/?p=5951"},"modified":"2022-05-30T00:33:01","modified_gmt":"2022-05-30T00:33:01","slug":"smsf-death-benefits-the-key-to-avoiding-conflicts-of-interest","status":"publish","type":"post","link":"https:\/\/www.tagfinancial.com.au\/blog\/smsf-death-benefits-the-key-to-avoiding-conflicts-of-interest\/","title":{"rendered":"SMSF death benefits: the key to avoiding conflicts of interest"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\"><em>Author: Emma Partenza, Manager, TAG Financial Services<\/em><\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"alignright size-full is-resized\"><img decoding=\"async\" src=\"https:\/\/www.tagfinancial.com.au\/blog\/wp-content\/uploads\/2022\/05\/iStock-1317153364-doc.jpg\" alt=\"\" class=\"wp-image-5960\" width=\"408\" height=\"272\" srcset=\"https:\/\/www.tagfinancial.com.au\/blog\/wp-content\/uploads\/2022\/05\/iStock-1317153364-doc.jpg 800w, https:\/\/www.tagfinancial.com.au\/blog\/wp-content\/uploads\/2022\/05\/iStock-1317153364-doc-300x200.jpg 300w, https:\/\/www.tagfinancial.com.au\/blog\/wp-content\/uploads\/2022\/05\/iStock-1317153364-doc-768x512.jpg 768w\" sizes=\"(max-width: 408px) 100vw, 408px\" \/><\/figure><\/div>\n\n\n\n<p class=\"wp-block-paragraph\">In the absence of a valid death benefit nomination, a trustee can exercise their discretion under the fund\u2019s trust deed on payment of the death benefits to beneficiaries. As a result of this discretion, conflicts may arise where the trustee is also a beneficiary of the deceased.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In exercising discretion in good faith, upon real and genuine consideration for the purposes for which it was conferred (that is, giving real and genuine consideration for any potential beneficiaries), trustees should:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li style=\"list-style-type: none;\">\n<ul>\n<li>determine all eligible beneficiaries of the deceased, their relationship to the deceased and their personal financial situation<\/li>\n<li>understand the deceased member\u2019s wishes detailed in their Will or on the binding nomination.<\/li>\n<li>seek specialist advice regarding the payment of death benefits, especially where the trustee is also a beneficiary of the deceased.<\/li>\n<\/ul>\n<\/li><\/ul>\n\n\n\n<hr class=\"wp-block-separator\"\/>\n\n\n\n<p class=\"wp-block-paragraph\">These outcomes resulted from the <strong><em>Wareham v Marsella<\/em><\/strong> case:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The deceased member had left an invalid death benefit nomination that nominated her superannuation benefits to be paid to her grandchildren from her first marriage. The deceased and her daughter were individual trustees of the SMSF, leaving the daughter as the sole remaining individual trustee to pay out the death benefits on her mother\u2019s death. The entire death benefit of the deceased was paid to herself (as a dependent of the deceased). The deceased\u2019s daughter (Helen) subsequently appointed her husband as a second individual trustee and re-executed documents paying the death benefit to herself.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The deceased\u2019s husband claimed the death benefit should have been paid to the deceased\u2019s estate (he was executor) or to him personally being a dependant of the deceased. He also claimed an independent trustee should have been appointed to attend to the death benefit payout.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The court found Helen had not fulfilled her trustee duty and had acted improperly and in bad faith as she had not given real and genuine consideration to the deceased\u2019s husband as a potential beneficiary. The benefit was ultimately not paid following her mother\u2019s wishes, as per her invalid death benefit nomination. She wished her benefits to go to her grandchildren; her Will also provided a life interest in a property to her husband and balance of her estate to be passed to her surviving daughter and son. Helen\u2019s brother, who also had children, was not considered as a potential beneficiary by Helen in the payment of death benefits. Helen\u2019s trustee discretion was not exercised in real and genuine consideration been given by Helen to all her mother\u2019s dependants in the payment of the benefits.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Courts do not conclude on the fairness or reasonableness of the trustee\u2019s decision, however, that the trustee\u2019s discretion was made in good faith and after genuine consideration being given. In this case, the payment of entire death benefits to herself supported the court\u2019s conclusion the trustee did not exercise discretion in good faith and lacked real and genuine consideration having been applied.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It can be learned from this case that a trustee who is also a dependent of the deceased must exercise their trustee discretion in good faith, having given real and genuine consideration to all potential beneficiaries to avoid potential conflicts of interest that could arise in payment of the death benefit.<\/p>\n\n\n\n<hr class=\"wp-block-separator\"\/>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Learn more at the TAG Super Seminar<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">At the TAG Superannuation Seminar, we will be delving further into this topic and exploring real life case studies that we have unfortunately encountered, analysing the issues, solutions and outcomes where members have not given adequate and proper planning to their estate matters, together with exploring how these issues could have been avoided.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">We go through the practicalities of dealing with such a situation and what needs to be done to ensure conflicts of interest have been properly documented and dealt with, to mitigate cases of future estate challenges.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Recent case law, and continuing emergence of these situations, re-enforces the importance of pre-death estate planning, and ensuring your clients have adequate estate planning documentation in place to prevent these scenarios from occurring and have death benefits paid in accordance with their wishes.<\/p>\n\n\n\n<figure class=\"wp-block-image\"><a href=\"https:\/\/www.tagfinancial.com.au\/seminar\" target=\"_blank\" rel=\"noreferrer noopener\"><img decoding=\"async\" width=\"1024\" height=\"171\" src=\"https:\/\/www.tagfinancial.com.au\/blog\/wp-content\/uploads\/2022\/03\/TAG-Superannuation-Strategies-2-1024x171.png\" alt=\"\" class=\"wp-image-5544\" srcset=\"https:\/\/www.tagfinancial.com.au\/blog\/wp-content\/uploads\/2022\/03\/TAG-Superannuation-Strategies-2-1024x171.png 1024w, https:\/\/www.tagfinancial.com.au\/blog\/wp-content\/uploads\/2022\/03\/TAG-Superannuation-Strategies-2-300x50.png 300w, https:\/\/www.tagfinancial.com.au\/blog\/wp-content\/uploads\/2022\/03\/TAG-Superannuation-Strategies-2-768x128.png 768w, https:\/\/www.tagfinancial.com.au\/blog\/wp-content\/uploads\/2022\/03\/TAG-Superannuation-Strategies-2.png 1200w\" sizes=\"(max-width: 767px) 89vw, (max-width: 1000px) 54vw, (max-width: 1071px) 543px, 580px\" \/><\/a><\/figure>\n\n\n\n<hr class=\"wp-block-separator\"\/>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Any Questions?<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If you have any questions, please contact us on&nbsp;<strong>03 9886 0800<\/strong>&nbsp;or via&nbsp;<a href=\"mailto:super@tagfinancial.com.au\"><strong>email<\/strong><\/a>.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"alignleft\"><img decoding=\"async\" width=\"50\" height=\"50\" src=\"https:\/\/www.tagfinancial.com.au\/blog\/wp-content\/uploads\/2020\/05\/icons8-handshake-50-4.png\" alt=\"\" class=\"wp-image-2247\"\/><\/figure><\/div>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Specialist Advice<\/strong><br>If you would like to discuss a project, please&nbsp;<a href=\"mailto:super@tagfinancial.com.au\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>contact us<\/strong><\/a>. Our advice is quoted upfront for your approval before commencement.<br><br><br><em>Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2022. Please do not reproduce without the expressed written consent of the author.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In the absence of a valid death benefit nomination, a trustee can exercise their discretion in regards to the payment of the death benefits to beneficiaries. Find out the key to avoiding conflict of interest in these cases. <\/p>\n","protected":false},"author":1,"featured_media":5964,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-5951","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-super-technical-updates"],"_links":{"self":[{"href":"https:\/\/www.tagfinancial.com.au\/blog\/wp-json\/wp\/v2\/posts\/5951","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.tagfinancial.com.au\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.tagfinancial.com.au\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.tagfinancial.com.au\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.tagfinancial.com.au\/blog\/wp-json\/wp\/v2\/comments?post=5951"}],"version-history":[{"count":0,"href":"https:\/\/www.tagfinancial.com.au\/blog\/wp-json\/wp\/v2\/posts\/5951\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tagfinancial.com.au\/blog\/wp-json\/wp\/v2\/media\/5964"}],"wp:attachment":[{"href":"https:\/\/www.tagfinancial.com.au\/blog\/wp-json\/wp\/v2\/media?parent=5951"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.tagfinancial.com.au\/blog\/wp-json\/wp\/v2\/categories?post=5951"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tagfinancial.com.au\/blog\/wp-json\/wp\/v2\/tags?post=5951"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}