Following a spate of recent disputes involving invalid death benefit nominations, one technical expert is urging SMSFs to carefully review the processes set out in their deed for making a valid nomination.
Speaking in a recent webinar in early February 2018, Smarter SMSF chief executive Aaron Dunn said there have been a number of cases, including Cantor Management Services Pty Ltd v Booth [2017] SASCFC 122, where simple processes required for making a valid nomination have come under close scrutiny, particularly where the rules of the fund require the nomination to be accepted by the trustee.
While SMSF practitioners and trustees tend to now follow the schedule in the back of the deed rather than getting a template which posed significant problems over the past few years, Mr Dunn said they also need to carefully check what is required in the governing rules of the fund for the nomination to be valid.
“Does it require the nomination to be accepted before it becomes valid? If it says it needs to be accepted, then we need a trustee minute resolution written by the trustees that notes that they’ve received the nomination, and that they’ve accepted that,” Mr Dunn explained.
“Now if it doesn’t require that, then it becomes automatically accepted once the member has completed it.”
With the downsizer contributions now legislated, this will provide some practitioners with an opportunity to discuss making changes to the deed with clients, he said, as some deeds will require changes in order for the fund to be able to accept the downsizer contributions.
“So as you’re going through deed updates, I would strongly recommend looking at your processes and being consistent with what you’re doing and how you do it, and aligning everything back to the fund’s deed,” said Mr Dunn.