People often hold significant wealth within their self-managed superannuation funds (SMSFs). However, SMSF trust deeds can be amended over time as circumstances and laws change.
For this reason, it is important to keep track of your SMSF trust deed and any amendments. You should also understand how the trust deed affects your Death Benefit Nomination and broader estate planning arrangements.
Your SMSF trust deed sets out important rules for how your fund operates. It also works together with superannuation legislation to govern the fund. The Australian Taxation Office provides further information about SMSF trust deeds.
Why Is Your SMSF Trust Deed Important?
Your SMSF trust deed can affect how your fund deals with important matters, including what happens when a member dies.
In particular, the trust deed may determine whether the fund allows a Binding Death Benefit Nomination or a non-binding nomination. It may also set specific requirements that a nomination must satisfy.
Therefore, you should not assume that a Death Benefit Nomination will be valid simply because you have completed and signed a nomination form.
The nomination must satisfy the requirements that apply to your fund and the relevant superannuation law. The ATO confirms that an SMSF can use a death benefit nomination where the fund’s trust deed permits it. The trustee must also ensure that nominated beneficiaries are entitled to receive the death benefit under the trust deed and superannuation law. Read the ATO’s guidance on SMSF death benefits and nominations.
What Should You Check in Your SMSF Trust Deed?
SMSF trust deeds are often amended over time. As a result, you need to establish which version of your trust deed currently applies.
As part of your estate planning, ask yourself the following questions:
| What to check | Why it matters |
|---|---|
| Original trust deed | Make sure you know where the original deed is held and can access it when needed. |
| Amendments | Identify every deed that has amended or varied the original trust deed. |
| Execution | Check that each amendment was properly executed in accordance with the applicable requirements. |
| Copies of documents | Keep copies of the original deed and all valid amending deeds with your SMSF records. |
| Death Benefit Nominations | Check whether your trust deed permits binding or non-binding nominations. |
| Nomination requirements | Check the specific requirements your trust deed sets for a valid Binding Death Benefit Nomination. |
Does Your SMSF Trust Deed Allow a Binding Death Benefit Nomination?
One of the most important questions is whether your SMSF trust deed allows you to make a Binding Death Benefit Nomination.
A Binding Death Benefit Nomination can form an important part of an SMSF estate planning strategy. It allows a member to nominate eligible beneficiaries to receive their superannuation death benefit, subject to the requirements that apply to the fund.
However, the trust deed needs to permit this type of nomination. The ATO explains that, if allowed by the fund’s trust deed, a member can make a death benefit nomination identifying who should receive their death benefit and in what proportion. The nomination may be binding or non-binding. Learn more about SMSF death benefit nominations.
This means that checking the nomination form alone may not be enough. You should also check the governing trust deed and any amendments that may affect the nomination.
Why Do SMSF Trust Deed Amendments Matter?
It is common for SMSF trust deeds to change over time. However, problems can arise if you cannot establish which deed currently applies or whether an amendment was validly made.
For example, your SMSF may have an original trust deed together with several amending deeds. If the records are incomplete, it may become difficult to determine the current terms of the fund.
The same issue can arise when a member dies. The trustee may need to determine whether a Death Benefit Nomination was valid and how the member’s death benefit should be distributed.
What Can We Learn from Re Narumon Pty Ltd?
In a recent estate dispute, the Supreme Court of Queensland considered issues concerning the documents governing a self-managed superannuation fund in Re Narumon Pty Ltd [2018] QSC 185.
The case involved questions about amendments to the SMSF trust deed and the operation of Binding Death Benefit Nominations.
The decision demonstrates why it is important to keep accurate records of your SMSF trust deed and all amendments. It also highlights the potential problems that can arise when there is uncertainty about which documents contain the current terms of a fund.
For SMSF members and trustees, the practical lesson is straightforward: keep your trust deed, amendments and Death Benefit Nominations together and make sure they accurately reflect your current arrangements.
What SMSF Documents Should You Keep?
Good administration can help prevent unnecessary uncertainty when a member dies. You should keep copies of important SMSF documents, including:
- the original SMSF trust deed;
- all amending deeds;
- current and previous Death Benefit Nominations;
- documents showing that amendments were properly executed; and
- other important records relating to the fund’s governing rules.
You should also make sure the relevant people know where these documents are kept. This can make it easier for the trustee to establish the current terms of the fund when required.
How Does Your SMSF Fit Into Your Estate Plan?
Your SMSF should form part of your broader estate planning strategy.
Your Will does not operate in isolation from your superannuation arrangements. The way your SMSF is structured, the terms of your trust deed and any Death Benefit Nomination can all affect how your superannuation is dealt with after your death.
It is therefore important to review your SMSF arrangements when your circumstances change. This may include changes to your family circumstances, beneficiaries, trustees or broader estate planning objectives.
You should also consider reviewing your documents if you discover that an older version of your trust deed is being used or that you cannot locate previous amendments.
SMSF Trust Deed Checklist
Before finalising or reviewing your estate plan, consider whether you can answer yes to each of the following:
- Do you have the original SMSF trust deed?
- Do you have copies of all amendments?
- Have you confirmed which deed contains the current terms of your SMSF?
- Have you checked that amendments were properly executed?
- Does your trust deed allow a Death Benefit Nomination?
- Have you checked the requirements for a Binding Death Benefit Nomination?
- Does your current nomination reflect your wishes?
- Have you considered your SMSF as part of your broader estate plan?
If you cannot answer these questions confidently, it may be worth having your SMSF documentation reviewed.
Get Advice About Your SMSF and Estate Plan
People often focus on preparing a Will when making an estate plan. However, your superannuation arrangements also require careful consideration.
Your SMSF trust deed, any amendments and your Death Benefit Nomination can all affect how your superannuation is dealt with after your death.
Our experienced lawyers can help you consider how your SMSF arrangements fit within your broader estate planning strategy.
If you are unsure whether your SMSF documents are up to date or want to review your estate planning arrangements, contact us today to discuss your circumstances.