DIY Disaster: Estate Planning and Self Managed Superannuation

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Too often we see the headlines Estate Planning DIY Disaster. Its most recent appearance graced the pages of the Self-Managed Super Fund Advisor on July 9. It read “DIY Estate Planning disasters increasing”. Unfortunately, it is true.

Many people do not understand the nature of their superannuation and that it cannot be dealt with in your will as it is not part of your estate.   People are going to the expense of setting up their own Self Managed Superannuation Fund (SMSF) and managing their own super, however, they are not seeking expert advice on their estate planning meaning that in some cases their main asset is not being adequately dealt with.

Who gets your superannuation death benefits when you die?

If you have a SMSF, you probably want to know who controls it after you die? Both answers come from important decisions that cannot be covered by a DIY Will kit.

The importance of getting it right and the pitfalls of getting it wrong were clearly highlighted in Katz v Grossman (NSWSC) involving a deceased father’s SMSF and the distribution of his superannuation death benefits.   Mr Katz and Mrs Grossman were children of the deceased.    At the time of the father’s death, he and his daughter were individual trustees of the SMSF.

The deceased had indicated that he wanted his superannuation death benefit to be shared equally between his two children. However, he had not formally entrenched his wishes by putting in place a Binding Death Nomination (“BDN”).  After he died, his daughter refused to follow his wishes and since she was the sole trustee of the SMSF Mrs Grossman had the right and power to give the death benefit to herself.

This could have been avoided if the father had put in place a BDN as it would have bound the daughter, a trustee of the SMSF, to the father’s dying wishes.

Engaging an experienced estate-planning lawyer is the best way to be sure your superannuation will be handled and dealt with properly.

Brendan Cockerill is a Business and Succession Lawyer at Dobinson Davey Clifford Simpson, 18 Kendall Lane, New Acton, Canberra ACT 2601 and can be contacted on (02) 6212 7600.

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