Many in retirement are travelling comfortably, with three key factors contributing to their happiness – good physical and mental health and enough money to enjoy life.
Perhaps the assumption that markets are still anchored by predictable economic policies needs to be challenged. For the first time since the fall of the Berlin Wall, political volatility – once background noise – is potentially reshaping investment risk at a structural level.
SMSF legal disputes on the rise
Most people are well aware of the many benefits of family trust and self-managed super fund (SMSF) structures, but less so about the potential drawbacks. That is something reflected in the surge in legal disputes between trustees of both structures thus far in 2021, according to Marie Brownell, national manager of estate planning at Equity Trustees.
“Legal disputes over trusts are on the increase,” she said in recent update to the market. As one of Australia’s leading independent trustee services, Equity Trustees sees this firsthand.
The taxation benefits of trusts along with the significant control that both they and SMSFs offer to the trustees have been a driving force behind their popularity. So much so, that there are now 600,000 SMSFs, with more than 1.1 million member/trustees.
Yet many people forget that both these structures are non-estate assets, meaning they are not automatically included in the distribution and consideration of your estate; in fact by default, they may avoid it all together.
This is an issue highlighted in a recent court case by Brownell, dubbed Wareham v Marsella. In this case, an SMSF was established by the deceased, naming only her daughter as the other trustee of the fund. Upon the member’s death, the daughter assumed control of the assets, paying them to herself and effectively cutting out the deceased’s surviving husband.
Naturally, the husband challenged the will, and won in all three of the claims made about the inappropriate transfer of the funds, but it isn’t always this easy, and legal costs accrue regardless of the result.
“A common issue we see with trusts is where someone has gone to their accountant to seek advice on how to minimise tax. The accountant then uses an off-the-shelf trust which is often not drafted properly,” says Brownell. The use of DIY, low-cost trusts may be great in terms of quick implementation, but few give much flexibility in the long-term.
The solution suggested in the case of SMSFs is to ensure you have a binding death benefit nomination in place at all times and that it complies with your trust deed. Similarly, in the case of trusts, review your deed regularly to ensure the passing of power, such as the role of the Appointor, is clearly defined in your will.
Most importantly, Brownell highlights that “what’s usually overlooked is who that continuing trustee might be. If it’s someone who stands to benefit themselves, in a manner contrary to your wishes, then you need to carefully consider what steps you need to take to ensure your death benefit is paid as you intend.”
