Superannuation and Self Managed Funds

Kallan Lawyers advises trustees and members of self managed superannuation funds, and the accountants and financial advisers who look after them. We deal with the legal side of the fund: the deed, the documents, the death benefit arrangements and the way the fund fits into the rest of a client's structure.

We are not financial advisers. We do not advise on whether to have a fund, what it should invest in, or on contribution strategy. Those are your adviser's questions.

Your will does not control your superannuation

This is the single most common misunderstanding we encounter, and it is worth stating plainly. Superannuation is not an estate asset. On death, the benefit is paid by the trustee of the fund under the fund's deed and the superannuation legislation. A will directs the estate, and reaches a death benefit only if the benefit is directed to the legal personal representative.

The result is that a carefully drafted will can sit alongside a superannuation balance that goes somewhere else entirely, decided by whoever controls the fund after the member dies.

For many clients the fund is among the largest assets they have. It is also the one most often left out of the estate plan.

Where the death benefit actually goes

Three things determine the outcome, and they have to be read together:

• The deed. It sets out what nominations the fund accepts, in what form, and what the trustee must do with them. Deeds differ, including on whether a nomination can be non-lapsing.
• The nomination. A binding death benefit nomination directs the trustee, if it is valid and in force. A non-binding nomination expresses a wish the trustee may depart from. Nominations fail for technical reasons surprisingly often, including lapsing unnoticed, not being witnessed correctly, or naming someone who is not a dependant.
• Who controls the fund. Where there is no effective nomination, the trustee decides, and after a death the surviving trustee or director is frequently the person with the most to gain from the decision. In a blended family that is a predictable source of litigation.

What we advise on

• Fund deeds. Reviewing the current deed, updating deeds that have fallen behind, and confirming that the deed permits what the trustee proposes to do.
• Binding death benefit nominations. Drafting nominations that comply with the deed and the legislation, and advising on whether directing the benefit to the estate or to a dependant produces the better result.
• Fund succession. Who becomes trustee or director on death or incapacity, how that is documented, and whether an enduring power of attorney is needed to keep the fund compliant.
• Limited recourse borrowing. Establishing the holding trust for a property purchase, and the related loan documents.
• Related party lending to the fund, documented to meet the borrowing rules.
• The interaction with the estate plan, including whether the benefit should fund a testamentary trust.

Working with your adviser and accountant

SMSF work almost always involves a financial adviser, an accountant and often an auditor. We are comfortable being the legal specialist in that group. Where a strategy has been recommended, our role is usually to confirm the deed permits it and to prepare the documents that make it effective.

This page is general information about the kinds of matters we advise on. It is not legal, tax or financial advice, and your fund's deed and your own circumstances will change the answer.