Topdocs warning on death benefits in SMSFs
Specialist superannuation documentation provider Topdocs has pointed to the need for self-managed superannuation fund (SMSF) trustees to get their trustee deed documentation in order to avoid potential death benefit disputes.
Topdocs' national manager, training and advice, Michael Harkin has pointed to SMSFs as being likely to experience as many issues around death benefit disputes as Australian Prudential Regulation Authority regulated funds, but says it is unlikely this is being noticed because they are not subject to the jurisdiction of the Superannuation Complaints Tribunal.
"Although there is no body, below the level of the Supreme Court, for hearing complaints about SMSF trustee decisions, from the feedback and commentary we're receiving from the industry, both SMSF and superannuation members in general have a very poor understanding of what will happen to their super should they die, and misconceptions abound," he claimed.
"Many believe their super benefits will automatically pass to their estate or that the executor of their will can assume control of their super or that their fund trustee will automatically divide their benefits among their parents," Harkin said.
"Sadly, nothing could be further from the truth."
He said that unless provided with specific directions, superannuation trustees will make the decision, with benefits going to those most in need.
"Unfortunately, these may not necessarily be the nearest and dearest, but could well be people the deceased has fallen out with or has ceased to have a relationship with," Harkin said.
However, he said SMSF members were in the enviable position of being able to more easily rectify the problem.
"If their trust deed is drafted effectively, they have far greater flexibility in ensuring their death benefits go to their intended recipients than is the case for other types of superannuation funds. In addition, they also have a much greater variety of safeguards to choose from," Harkin said.
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