Wills and self-managed super funds: What happens if you don’t get involved in your parents’ affairs?
Without realising it, there can be unknown consequences to misunderstanding the roles an Executor of a Will and the Trustee of a self-managed super fund (SMSF) have with estate planning, even if there are good intentions by everyone involved.
HopgoodGanim Partner Brian Herd is recognised as one of Australia’s leading experts in the areas of elder law, retirement, disability and aged care. In this article, we feature an adapted extract from Brian’s book, Avoiding the ageing parent trap, which describes a scenario that shows what can happen if adult children are not proactive and consultative in supporting their parents with managing their estate planning affairs well.
If ever there was a reason to get involved in your parents’ affairs, it’s this case involving the ignorance surrounding the interplay between the role of an Executor of a Will and the Trustee of a SMSF.
Dad had two children, a son and daughter. Not surprisingly, his Will left everything to them in equal shares. Part of his wealth consisted of $1 million in his SMSF. He and his deceased wife had been the trustees of the SMSF but, when his wife died, he appointed one of his children, his daughter, as a co-trustee with him.
Consistent with his Will, the dad had made a non-binding death benefit nomination providing that his death benefit in the SMSF, the $1 million, was to be paid to his two children equally. He died and his co-trustee, his daughter, then appointed her husband as a trustee. Shortly thereafter, the daughter and son-in-law, as the trustees, and ignoring the father’s nomination as they were entitled to, decided to pay the death benefit in full to the daughter, herself.
The son was suitably outraged and challenged the decision. He failed. Because the nomination was not binding, the trustees of the fund had a discretion who they should pay the benefit to. In those circumstances, there was nothing to prevent them from paying it to the daughter and not complying with her father’s wishes.
Our lives are interwoven in many ways and nowhere is this better demonstrated than in this case where dad did not understand the law, let alone the intrinsic connection between his Will and SMSF. The children don’t talk to each other anymore (they did before Dad died).
Brian Herd won Solicitor of the Year (Large Firm) at the Queensland Law Society Excellence in Law Awards 2022. He was awarded the 2021 Australasian Journal on Ageing (AJA) Book Award after publishing his book, Avoiding the ageing parent trap, which is available to order from Booktopia.
HopgoodGanim’s Estates and succession team provides careful, considered and precise estate planning and succession advice to ensure family and business assets are transitioned as intended. The team designs estate plans for clients, in addition to supporting with estate administration, estate litigation and SMSF matters. You can find out more about Brian’s expertise and reach out to the team with any enquiries related to SMSFs and broader estate planning.