Estelle and George wished to assume trusteeship over the fund and, therefore, exercise trustee discretion in relation to the payment of Peter’s member benefits – he did not have a binding death benefit nomination. They contended that Tony’s trusteeship terminated on the date of Peter’s death as the enduring power of attorney ceased at that time. The Judge agreed that the enduring power of attorney had ceased but that Tony’s appointment was as an individual and, consequently, his trusteeship did not also cease.
Careful consideration of the Deed might have given Estelle the opportunity to terminate Tony’s appointment but this was not relevant as such action was not taken.
There was some interesting discussion surrounding the continuing compliance of the SMSF following the expiration of the six-month grace period allowed for the LPR to be appointed. Essentially if the trust deed had stipulated that fund membership ceased on death, then Tony’s continuing trusteeship would not cause a SIS compliance problem as a single member fund requires two individual trustees. As it did not, the judge felt that Peter’s membership continued, notwithstanding that he was deceased, therefore his LPR, George, should have been appointed within 6 months of Peter’s death to ensure SIS compliance.
As SIS compliance was not the focus of the case, no determination was made in this regard. What was determined was that Tony’s trusteeship did not terminate on Peter’s death, irrespective of whether this caused a compliance problem for the SMSF or not.
This case shows how important proper estate planning and appropriate deed wordings are, particularly in blended family situations. It’s probable that no one expected Peter to pass before the divorce settlement had been finalised but this expectation proved faulty. Good estate planning requires planning for both the expected and the unexpected.
