1. DEATH BENEFIT NOMINATIONS (DBN)1 AND THE ELYSIAN FIELDS
Executive Summary
1. The authors of the Cooper Report (at p154) were correct in recommending a change of
approach to DBNs to lessen the possibility of an inequitable outcome due to changed
circumstances and for the judicial consideration of DBN’s to be guided by relevant
testamentary disposition legislation and, by inference, the established common law
approach to those types of matters.
2. In my view, the recommendations should have gone further and should have recommended
amendment to legislation in order to facilitate this approach.
A genesis of this discussion
3. In the Cooper Report at p.154 the author correctly reports that “… a Trustee has no
discretion when the member has lodged a valid binding death nomination and must pay
benefits to the nominated beneficiaries, subject to them meeting the legislated eligibility
criteria.”
4. The concern of the author was that the binding nature of DBN’s could work an inequity
because of changed circumstances but referred to the rule requiring re-confirmation every
three years designed to “… ameliorate the risk of inequitable outcomes due to a change in
circumstances.”
5. A further concern was that DBN’s could lead to unintended outcomes because of changed
circumstances of the deceased and changed circumstances (resulting from things such as
divorce). A recommendation is made that “… binding death nominations should be
invalidated when there are intervening circumstances. The current system used by the
1
PV Slattery QC, Barrister, Anthony Mason Chambers, Adelaide
For the purposes of this paper, the singular includes the plural; masculine includes the neuter and all other genders.
PVS1060
2. 2
States and Territories could be looked to for guidance and then an appropriate amendment
made to the SIS Act …”
6. This discussion led to recommendation 5.14 which reads as follows:
“The SIS Act should be amended so that binding death nominations would be
invalidated when certain “life events” occur in respect of the members. The current
systems used by States and Territories under which testamentary dispositions are
invalidated could be used as guidance for creating a single national model.”
7. The thesis of this paper is to:
7.1 Recommend acceptance of recommendation 5.14 of the Cooper Review, but, in
circumstances where the implementation of that recommendation can only occur in
the same structured environment as exist in relation to testamentary dispositions; and
7.2 Suggest that the recommendation falls short of a complete answer to the problem
created by a death benefit nomination when viewed in light of practical
circumstances, Trust Deed terms, and the (perhaps sometimes inevitable) falling out
between family members in relation to the binding death benefit nominations which
are internally no more than and must be viewed in the same context as testamentary
dispositions.
7.3 A second recommendation (5.15) that binding death benefit nominations should only
have to be reconfirmed every five years. In light of the discussion that preceded that
recommendation, it is difficult to understand the justification for it, however, that is a
matter for another day and will not be addressed in this paper.
8. It is obvious that this Paper will not deal with non binding death benefit nominations and it
will not deal with any other type of superannuation fund, except a self managed superfund
(SMSF) (even though much of what is said here may be applicable to entitlements in other
APRA regulated funds).
3. 3
9. In a paper delivered to the Tasmanian division of the Tax Institute of Australia on 15
October 20102 Susan McKenzie3 (“McKenzie”) describes a number of issues about
proposed death benefit distributions being questioned because of:
9.1 Questions about whether a particular document might constitute a binding death
benefit nomination;
9.2 Confusion over whether a binding death benefit nomination has been invalidated;
9.3 Misunderstandings about whether a person is a dependant;
9.4 The death of a nominated dependent and the Trustee not then knowing who is eligible
for the death benefit payment;
9.5 Certain eligible dependents determining to waive their interest in the distribution;
9.6 In an SMSF context, who should continue as Trustee or directors of a corporate
trustee when one of the members dies?
10. In my view, this is a very useful list as a starting point in giving considerations to the
problems that arise in dealing with DBNs. I do not propose to deal with all of these
questions and I recommend a close reading of McKenzie’s paper, which is both detailed
and informative. In my opinion, for the reasons which I set out hereunder, the dominant
issue in all of this is: Has the deceased properly dealt with his superannuation entitlements
in a manner that fulfils the intention of the deceased (about what is probably his largest
asset).
11. I propose that after the death of any person, the same approach that Courts apply to
testamentary instruments and their admission of testamentary instruments to Probate should
be applied to death benefit nominations. This approach is the product generally of a
mixture of statutory and common law developments of longstanding duration.
2
“Breaking the Shackles of Tax: Dying for Super”.
3
Partner, DMAW Lawyers.
4. 4
12. At paragraph 1.2 of her paper, McKenzie4 suggests that:
“During the recent review of the Australian Superannuation System headed by
Jeremy Cooper members of the industry questioned whether it might be more
appropriate for all superannuation to be paid to a deceased member’s estate to be
then handled as part of the deceased estate. While Cooper was prepared to make
some recommendations around death benefits5 he wasn’t prepared to go this far
despite there being some merit in this approach, particularly from a Trustee’s
perspective.”
13. In my opinion, Cooper should have recommended a broadening of the approach to DBNs
to be dealt with in a manner similar to or identical to testamentary dispositions. In my
view, there is very little justification for creating a separate set of rules and structures for
dealing with the assets of a deceased after that person’s death, whether they be
superannuation assets or otherwise. Where the wishes of a deceased in relation to their
super entitlements have been sufficiently communicated and recorded, then that record
should not be any less effective but for lack of compliance with a technical requirement of
a Trust Deed stipulation than, for example, a will to be divined from a statement of
intention of a deceased.
14. I do not recommend a wholesale departure from the technical requirements of
communication to a Trustee, of writing, witnessing and execution but I do not subscribe to
the view, often heard, that the concept of a binding death benefit nomination in the context
of a superannuation trust of a deceased person should fail for want of form prescribed
under a Trust Deed. In my view that position is deserving of little merit.
The Paradigm of Death Benefits Nominations
15. Sub-regulation 6.22(2) of the Superannuation Industry (Supervision) Regulations (“SIS
Regulations”) provides that death benefits must be cashed in favour of the deceased
member’s:
4
Op cit p.2 paragraph 1.2
5
Recommendations 5.14 and 5.15
5. 5
15.1 dependants;6 or
15.2 Legal personal representative.7
16. The role of the executor of the Will in the context of legal personal representatives is to
obtain the grant of probate (the proving) of the Will and, where necessary, any other orders
for the administration of the estate. Administration of an estate ordinarily applies where a
person dies without a will (intestate) and it then becomes necessary for another person to
apply for a Grant of Letters of Administration and to become an administrator of the
deceased’s estate.
17. The paradigm is in relation to the position of a dependant. The definition of dependant
under the SIS Act is broader than under the Tax Act.8
18. S10 SIS Act defines dependant for the purposes of regulation 6.22 to include:
18.1 a spouse of the deceased;9
18.2 any child of the deceased, including an adult child;10
18.3 any person who had an interdependency relationship with the deceased immediately
prior to death;11
19. It is apparent that the definition of an interdependency relationship is intentionally broad, is
“inclusive” because of the use of the word “include” and, it must also be noted, the
definition is conjunctive. All of the attributes can be satisfied by a combination of
6
The SIS legislation treatment of dependant is different from the tax legislation treatment of a dependant. ITAA 97 provides that a death
benefits dependant under Section 302-195 covers a spouse, a child under 18 years, a person with whom the deceased was in an
interdependency relationship immediately prior to death and any person who was financially dependent upon the deceased immediately
prior to death
7
S.10 SIS Act defines legal personal representative as the executor of the Will or administrator of the Estate of the deceased person.
8
Op cit n
9
A spouse includes a de facto spouse and since 1 July 2008 a same sex spouse.
10
A child includes an adopted child, a stepchild or an ex-nuptial child; since 1 July 2008 a child of the person’s spouse; and since 1 July 2008
someone who is a child of the person within the meaning of the Family Law Act 1975. This covers children born through artificial
conception and surrogacy arrangements.
11
An interdependency relationship is defined as persons having a close personal relationship, living together, one or each of them provides the
other with financial support and one or each of them provides the other with domestic support and personal care, there are exceptions for
those persons suffering from a physical intellectual or psychiatric disability who are in an interdependency relationship.
6. 6
circumstances. The usual legal parlance is that these are all questions of fact. It is not the
purpose of this paper to discuss aspects of interdependency; it is now quite clear that a
parent can be interdependent upon a child12. And this topic has been adequately dealt with
elsewhere.13
20. From a purely practical perspective a matter of particular interest here is whether a de facto
relationship exists and the parties to that de facto relationship are spouses.14 This reflects
upon the changing attitudes and standards of society as a whole. The difficulty then is how
to make an assessment of those standards and legislate accordingly in a way that is fair,
equitable and is necessarily certain.
21. There have been a number of judicial pronouncements about what constitutes a de facto
relationship. The decision which is usually quoted in this context is that of Justice Powell
in Roy v Sturgen.15 This and other like decisions do not define what is or is not a de facto
relationship. As is usually the case in these matters of the exercise of discretion by judicial
officers, a number of features are identified as being relevant in deciding whether or not
there is a de facto relationship.16 The jurisdiction of Courts in relation to these types of
relationships were formerly the province of State Courts, but are now largely dealt with in
the Family Court.
22. One of the peculiarities of being in the position of a trustee is that the trustee may receive a
claim from a person claiming to be in an interdependency relationship or as a de facto
12
Regulation 1.04AAAA; SCT Determination D06-07059; Malek (ATF the Estate of Antoine Malek) v Federal Commissioner of Taxation
(1999) 42 ATR 1203.
13
McKenzie Op cit.
14
Generally, although not always, de facto relationships exist between two persons who otherwise be married. Because someone remains a
spouse until they are formally divorced from t heir spouse, it is therefore possible to have several spouses at the same time.
15
(1986) 11 NSWLR 454.
16
In this context, they are: The duration of the relationship; the nature and extent of the common residence; whether or not a sexual
relationship existed; the degree of financial interdependence and any arrangements for support between or by the parties; the ownership, use
and acquisition of property; the procreation of children; the care and support of children; the performance of household duties; the degree of
mutual commitment and mutual support; reputation and public aspects of the relationship.
7. 7
spouse. Rhetorically, what is the trustee to do because the trustee must eventually make a
decision about this claim? One suggested answer that is often proffered is for the trustee to
gather as much evidence as the trustee has available to make a decision. In my opinion this
is fraught with difficulty because, inevitably, in human relationships, there will be a contest
about the matters upon which a trustee is called upon to make a decision, such as, whether
a person is or is not a de facto spouse. Again, it is not the provenance of this paper to opine
or advise on those issues, but, in my opinion, a trustee is placed in an unenviable position17.
That is only complicated when there are, for example, short term relationships18 and just
one complication is that very young people can be in a de facto relationship.19
23. At the outset of this paper, I indicated my views about the interplay between the terms of
trust deeds and the governing rules, binding death benefit nominations and the SIS Act.
You will all be familiar with trust deeds that adopt SIS legislation definition as a “fail safe
method” but the issue is whether this is a “fail safe method” or really gives any assistance
in resolving issues that appear to arise almost daily. It is appropriate that a survey be made
first of the applicable legislation, the principles of Equity that are well settled and firmly
established and then to look at practical examples where little assistance may be gained
from any of them.
The application of SIS and SISR for BDBN’s in respect of SMSF’s
24. The question of whether Regulation 6.17A SISR applies to an SMSF has been sufficiently
ventilated and there is little that I can add which will, in any way, elucidate the positions
that have been taken.20 We are all well familiar with the content of Regulation 6.17A
17
More likely that a trustee will never please everybody in the exercise of discretionary powers
18
In SCT Determination D09-10042 the SCT decided that a fiancé in the peculiar factual circumstances of that case was a spouse.
19
SCT Determination D06-07/139 where two people under the age of 18, the male 17 and the female 16, who had been in a relationship over
an 18 month period were held to be in a de facto relationship.
20
cf McKenzie at paragraph 3.1 and 3.2 and Maddocks: Binding Death Benefit Nominations – Caution Required on Non-lapsing
Nominations: October 2008: published by Cleardocs.
8. 8
SISR. I will not reiterate those requirements here. We will also be well familiar with
SMSF determination SMSF D 2008/3 in which the Commissioner expressed his opinion
(non-binding legally) that s.59(1A) SISA and Regulation 6.17A SISR do not apply to
SMSFs. The trust deed itself may provide that the formalities of Regulation 6.17A may
apply.21
25. It is not the purpose of this paper to express a concluded view about the application of
s.59(1) and s.59(1A) SISA and SISR 6.17A.
26. It is sufficient to say that at trust law, generally, a trustee’s (unfettered) decision making
discretion could not be interfered with by outside parties. This was to avoid the situation
where a person (the settlor) who established the trust and appointed trustees to it, reserved
the rights to direct trustees like “marionettes”. The position became and remained that,
apart from any conditions imposed on the trustees in the initial trust deed, they could not be
subject to outside direction in the exercise of their discretion. The trust deed was the
primary source of the rules and guidelines operating upon a trustee’s behaviour, discretions
and responsibilities.
27. An exception to that general Rule has always been the Superannuation Trust which are now
described as Self Managed Superfunds, but were formerly described as Excluded
Superannuation Funds before 1999. Under these arrangements, members of the SMSF
could direct where and to who their death benefits are to be distributed. The only proviso
is that they are required to be paid to the legal personal representatives of the member
and/or dependants pursuant to Regulation 6.22 SISR.
28. S.59(1) SISA provides a general prohibition against anyone other than a trustee exercising
a trustee’s discretion. The sub-section operated in respect of the governing rules of a
21
See Donovan v Donovan 2009 QSC 26. See also the comments of Justice Fryberg in that decision (that do not in any way form part of his
Honour’s judgment or could be relied upon or cited as authority for any particular proposition) wherein His Honour opines that above all
else, Regulation 6.17A SISR applies to SMSF’s.
9. 9
superannuation entity other than SMSF’s, to the effect that in SMSF’s, a discretion under
the rules may be exercised by someone other than a trustee. A binding death nomination is
a binding direction on a surviving trustee. It is not connected with the exercise of a
discretion. Thus, s.59(1) historically has never applied to SMSF’s which, also historically,
have recognised the ability of a member to make a binding death benefit nomination
directed to a surviving trustee.
29. The Superannuation Legislation Amendment Act 1998 provides an amendment to s.59
SISA by the insertion of a sub-section 59(1A) and an amendment to s.59(1) to make that
sub-section subject to the following sub-section, 59(1A).
30. S.59(1A) permits trustees to structure the governing rules of a superannuation entity so the
trustees can accept binding death benefit nominations from members. In addition, the sub-
section enables conditions in relation to the acceptance of binding death benefit
nominations by trustees to be prescribed in the SIS Regulations. It does not refer to
questions of the exercise of discretion of trustees.
31. By its specific wording (“despite sub-section (1)”), sub-section 59(1A) is a departure from
the general operation of sub-section 59(1) and also does not contain a repetition of the
reference to SMSFs. Sub-section 59(1A) is of general application (insofar as it is has
application) and allows members of relevant superannuation entities to establish clear
directions and processes about to whom death benefits are to be paid.
32. The Superannuation Legislation Amendment Bill 1998 (“the Bill”) was debated in
Parliament.22 Unhappily, none of the pertinent issues were identified or discussed. There
22
In the second Reading speech on 11 February 1999, Mr Joe Hockey said the bill “will improve the efficiency and effectiveness of the
Superannuation Supervisory framework. It will improve the certainty and efficiency of the existing arrangements in the processing of death
benefit claims by superannuation trustees. We will be watching superannuation trustees very carefully so that they can be assured –and the
beneficiaries can be assured– that a predictable, efficient and flexible program is put in place that ensures that the binding nomination from
a member for the payment of a death benefit is as described and promulgated rather than simply an abuse of existing arrangements.”
Mr Anthony Albanese said: “The amendment will allow superannuation funds to amend their rules so as to give binding effective to the
death benefit nomination provided by contributors. In other words, where a superfund chooses to change its rules, members of the fund will
10. 10
appears to be no ventilation of these matters that are, in one, so vexing and so unnecessary
as to be a waste of time and effort.
33. S.59(1)(a) SISA is also an exception to the general prohibition. It provides that the
governing rules may permit a discretion to be exercised by a person other than a trustee.
Otherwise the usual position applies that the governing rules require the trustee’s consent to
the exercise of the discretion. The governing rules must provide that the trustee consent to
the death benefit nomination. To implement this, the trustee must actively consent to such
nominations through a process of appropriate consideration.
have the security of knowing that upon their death their contribution will go to the person or people they have nominated when certain
conditions are met.…when fund members make death benefit nominations, they have no assurance that those nominations will be followed,
as payment is currently at the discretion of the Trustee…This Bill allows superannuation funds trustee to accept binding death benefit
nominations –subject, though, meeting certain requirements.”
Mr Kelvin Thompson said: “The Bill contains other measures. The most significant of these is the one that allows trustees to accept binding
death benefits nomination. Trustees’ responsibilities and duties come from trust law and the superannuation industry (supervision) Act
1993. They place a prudential and fiduciary responsibility on superannuation fund trustees to exercise care, skill and diligence in
undertaking their duties on behalf of Superannuation Fund members. Trustees regard the discretionary allocation of death benefit as an
important part of those prudential responsibilities – there is no question of that it ought also to be noted to that, generally, trustees are not
paid to undertake their role and do not benefit financially from that discretion to allocate death benefits. In the area of the death benefits, a
superannuation fund trustee may accept a nomination by a fund member to pay any death benefit to any personal entity. Under the present
arrangement, the member’s nomination is not binding on the superannuation trustee. Trustees have to ensure that any payment meets the
sole purpose test, which is that a superannuation fund should be maintained solely for one or more core purposes or one or more ancillary
purposes relating to the provision of benefits for use on or after retirement. The sole purpose test also allows for the provision of benefits on
or after a fund member‘s death if the death occurred before the member retirement and- or age 65 and the benefits are provided to the
member’s legal representative, to any of all of the member’s dependents or both. You can also have a fund member’s legal representative as
a representative of a deceased estate. The Government’s Bill contains technical amendments which permits superannuation fund trustees to
amend the trust deed of their Fund to allow them to accept Binding Death Benefit Nominations from members. I think it is fair to say that
there are a number of advantages in having trustee discretion; there are also some advantages in not having trustee discretion.…some
would argue –and I have heard this argued quiet vigorously – in favor of the person who has the Superannuation Fund in their name been
able to have their wishes given effect to. They take the view that their wishes ought to be paramount....Ms Annette Sampson expressed the
view that it is outrageous that fund members can not treat the super and death benefit emerging from it, in the same manner as assets held
outside the superannuation system. She pointed out that, while dependants can challenge a will, it has clear legal standing as a statement of
your wishes and a strong case is needed to overturn it. With super all you need to do is prove dependency, which can result in unfair
distributions. She welcomed the legislation as a step forward on that basis. I believe that Ms Sampson’s general assumption the people
should have a say in where their superannuation contributions and benefits are distributed in the event of untimely death is fair. It does
leave out the flip side about the benefits of having trustees determine where death benefits should be paid. It also, I guess, leaves up the fact
that the Government provides quiet general taxation concessions to superannuation savings for the purposes of assisting individuals to
build the bigger retirement income.”
Ms Julie Bishop said:”The first amendment to the Superannuation Industry (Supervision) Act would permit a trustee of the fund to amend
the governing rules of the fund to enable the acceptance of binding death benefit nominations from members. Payment of a death benefit is
ultimately a matter of trustee discretion and, in order to expand the range of options for trustees in managing death benefit payments and,
most significantly, to provide more certainty to members, the SISA would be amended to remove any impediment to funds voluntarily
structuring their governing rules so that trustees can accept binding death benefit nominations. Many funds presently use beneficiary
nomination forms to obtain guidance from members on how they would like the Death Benefits allocated. However, trustees are not
currently bound by these forms and, in fact, under Section 59 of SISA are prevented from being bound by such nominations. So, for funds
that choose to adopt the proposed approach, the trustees would automatically pay the death benefit to the person named on the beneficiary
nomination form- and that is a good thing. The conditions for the acceptance of binding death benefit nominations by trustees will be
prescribed in the SISR, so that there are appropriate safeguard to ensure that nominations are valid and kept up to date.”
11. 11
34. The essential difference between the two exceptions is the absence of a requirement for
consent by a trustee in ss.59(1A) SISA which instead requires compliance with SISR
6.17A.
35. Pursuant to SISR 6.17A principally the notice must:
35.1 be signed and dated by the member;
35.2 witnessed appropriately by two individuals not mentioned in the notice;
35.3 the nominated beneficiaries must be either dependants or the legal personal
representatives of the deceased member; and
35.4 The nominated beneficiaries must also be either dependants or the legal personal
representatives at the date of the member’s death.
36. There are two issues that arise from these matters: SMSF’s are not expressly excluded
from the operation of s.59(1A) which sets the standards for binding death benefit
nominations; SMSF’s are not expressly excluded from the operation of s.59(1)(a) which
sets the standards for the payment of death benefits; a priori it is arguable that both come
within the scope of the section.
37. S.55A SISA provides that members’ benefits should only be cashed in accordance with
standards prescribed by s.31 SISA. S31 SISA provides that the regulations may prescribe
applicable standards for the operation of regulated superannuation funds.
38. Regulation 6.17A SISR provides that for the purposes of ss.31(1) SISA the standard set out
in sub-regulation (4) is applicable to the operation of regulated superannuation funds. S55A
SISA was inserted by Act number 15 of 2007, s.3 and Schedule 1, Item 361 and is
applicable to the 2007/2008 income year and later years.
39. Ss.59(1A) SISA was amended by Act number 53 of 2004, s.3 and Schedule 2, Item 72 by
substituting “a trustee of the entity” for “the trustee” effective 1 July 2004.
12. 12
40. The explanatory memorandum to the Superannuation Safety Amendment Bill 2003
clarified the operation of SISA provisions as they applied a trustees of superannuation
entities.23 In particular, the amendments recognize that notice to an individual trustee is to
be regarded as notice to the group of trustees.24
41. There is considerable body of opinion that these sections “s.31, s.55A, s.59(1) and s.59(1A)
and Regulations (6.17) and (6.17A) are not relevant to the circumstances of an SMSF.25
Ruling SMSF D2008/D1
42. The ruling concerns whether there is any restriction under SISA on an SMSF trust deed
accepting from a member a binding nomination of the recipients of any benefits payable in
the event of a member’s death. In my view, SMSF’s or their predecessors have always
operated on the basis that members have made nominations to surviving trustees in the
form of binding wishes or nominations giving direction to those trustees for the distribution
of the benefits belonging to the members in the fund.
43. The ruling states that:
23
6.2 of the Explanatory Memorandum provides: “The existing SIS Act provisions impose obligations on “the
trustee”; however the trustee of a regulated superannuation fund may be either a constitutional corporation or
a group of individual trustees. The purpose of these amendments is to clarify the operation of the provisions of
SIS Act as they apply to trustees of superannuation entities, particular for a trustee that is one of a group of
individual trustees. The purpose is not to alter the definition of a trustee”.
24
Paragraph 6.4A of the Explanatory Memorandum provides: “Reference to a trustee means that one or more of
the individual trustees must do something, or ensure that something is done. The references to “the trustee”
are used to recognise that one of a group of individual trustees is required to act. For example, where APRA
seeks to give a written notice to a group of individual trustees, it is not necessary for APRA to give written
notice to each individual trustee within the group … A reference to “a trustee” is also used in relation to
transactions entered into by the trustee. These amendments recognise that one or more trustees may enter an
agreement or arrangement on behalf of the group of individual trustees, because the group of individual
trustees does not possess capacity as a separate legal entity.”
25
McKenzie, at paragraph 3.2.2 says the following, having identified the proposed interpretation approach under
the Acts Interpretation Act (s.15AA) Cth 1901: “In my view the purpose of s.59(1A) of the SIS Act and
Regulation 6.17A of the SIS Regulations is to permit trustees of large superannuation funds to pay benefits in
accordance with a binding death benefit nomination …” Having again identified that binding death benefit
nominations have been available to SMSF’s and, prior to that time, excluded superannuation funds, McKenzie
asked rhetorically why there were no transitional provisions to cater for binding death benefit nominations that
would have in existence when the new Rules commenced SF59(1A) and Regulation 6.17A commenced
operation. Of course, equally, it may be asked, rhetorically, why s.59(1) and s.59(1A) are drawn so clumsily
when an ordinary level of drafting skill could have made it quite clear that the provisions were not to apply to
SMSF’s and having regard to the view expressed by the Commissioner in Taxation Ruling SMSFD 2008/D1,
why it is that the Federal Parliament has not seen fit to correct what seems to be an anomalous drafting method
13. 13
43.1 there is no such restriction because s.59 of SISA and Regulation 6.17A of SISR do
not apply to SMSF’s;
43.2 a nomination is not binding to the extent that it nominates someone who cannot
receive the benefits in accordance with the operating standards set out in SISR (which
according to Regulation 6.17A(1) of SISR are set out in Regulations 6.17A(4)).
44. The ruling concerns itself with the Rules that apply to SMSF trustees with respect to SMSF
members making binding nominations. However, the principal focus of the ruling is really
on the issue of to whom a deceased member’s benefit may be paid – that is, the
Commissioner seeks to make it clear that death benefits can only be paid to the deceased’s
member’s legal personal representative or dependants. That is the effect of Regulation 6.22
and one would have thought that does not need clarification.
45. The Commissioner’s view, as expressed in the ruling, is that due to the exclusion of
SMSF’s under s.59(1) and because s.59(1) is now made subject to s.59(1A) and because
s.59(1) (now made subject to s.59(1A)) is expressed not to cover a self managed superfund,
then s.59(1A) does not, in turn, apply to SMSF’s and to that extent, SMSF’s are
unregulated.
46. The difficulty with that argument is obvious. The opening words of s.59(1A) is “despite
ss.(1) the governing rules of a superannuation entity may, subject to a trustee (singular) of
the entity complying with any conditions contained in the Regulations permit …” There is
no explanation or reason given or any reasoning elucidated about why the words “other
than a self managed superfund” are not contained behind the words “superannuation entity”
where they first appear in s.59(1A) so as to make the two sub-sections consistent.
Moreover, there is no explanation, reasons for or reasoning about the use of the expression
“despite sub-section (1), …”.
14. 14
47. The use of the word “despite” as the first word of the sub-section invites a form of
reasoning that a disjunctive is intended. That leads to the rhetorical question what of ss.(1)
of s.59 is not to be taken into account. Moreover, when one compares the two sub-
sections, it is immediately to be noted that “trustees” plural is used in s.59(1)(a) whereas
trustee singular is only used in s.59(1A). There is a historical reason why this is so, but that
historical reason does not explain why a proper drafting method, including an exclusion
from self managed superfunds (if that was the intention) was not used in this instance.
48. A second rhetorical question that arises is why, in these circumstances, is it anathema to the
operation of SMSF’s in these circumstances that minimum standard as prescribed under
Regulation 6.17A are not equally applicable to SMSF’s as well as other regulated
superannuation funds.
The Superannuation Fund Trust
49. Ordinarily a trust for a superannuation fund prescribes that the trust assets are held for the
benefit of qualifying members on the terms and to the extent defined by the deed.
50. The deed both embodies and gives effect to a contract between the trustee and the
member.26
51. The trustee has the usual obligation of a trustee to adhere to the terms and conditions of the
trust deed and, specifically, to all obligations imposed by that instrument.27
52. Departure from the terms and conditions of an instrument of trust is a breach of trust for
which the trustee is strictly liable, subject to being relieved by the Court. The trustee has
an obligation to pay money only to the persons to whom it is lawfully due. It is a breach of
26
McFadden v Public Trustee for Victoria [1981] 1 NSWLR 15.
27
The duty to observe the terms of the trust has always been seen as paramount. Underhill and Haydon call it: “The most important of all of
the rules relating to the duties of trustees”: Law Relating to Trusts and Trust Deeds (17th Edition 2008). Jacobs, Law of Trusts in Australia
(6th Edition 1997) says at [1704] that it is the trustee’s duty “to adhere rigidly to the terms of the trust”. See also WMC Gummow and
Youdan (ed) Equity, Fiduciaries and Trusts (Carswell 1989, 67: Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 484 at
[32].
15. 15
trust for a trustee to pay money other than to the beneficiary or beneficiaries entitled to
receive trust assets. A beneficiary who is either unpaid or underpaid by reason of a
trustee’s mistaken or unauthorised payment to a third party, or a trustees over payment of
another beneficiary, may sue the trustee for the recovery of the amount of the
underpayment.28
53. A trustee must be certain about the beneficiary or beneficiaries to whom monies are
payable. This is no less applicable under a superannuation fund as under any other trust.
In the usual circumstances, upon the death of a member, a superannuation trustee will have
an express obligation to distribute benefits due to the member. In that instance, it would
ordinarily be a breach of trust for a trustee to defer payment without proper cause. The
vital question is the actual distribution of the benefits due to the member.29
A (not so) imaginary example
54. These principles are not immutable or so inflexible as to be unworkable. In order to make
good that assertion, consider the following scenario:
54.1 ABC fund, historically always an SMSF (or its predecessor in style) was
established by trust deed in June 1978 (the original deed).
54.2 The original deed was amended in June 1990, January 1994 and October 2003.We
may assume that by no later than 2003 the fund was an SMSF for all purposes.
54.3 At the point of his death, Charles was a member of the fund and a death benefit
became payable from the fund upon his death under the terms of the deed. Charles
was the patriarch of his family and was the principal contributor to the fund.
Though it was an SMSF, Charles was the most active trustee.
28
Burns v Leda Holdings Pty Ltd [1988] 1 Qd R 214 at 227-8.
29
cf sub-regulation 6.17B SISR.
16. 16
54.4 Throughout the existence of this fund Charles had made memoranda of wishes
about the distribution of his death benefit and these were always the same: 25% to
his surviving (second) wife Isabelle and the balance to two of his children from a
prior marriage of Charles. Isabelle and the two children were not close.
54.5 Prior to his death, Charles, as was his want, executed a document in the presence
of his solicitors and two witnesses that he called a confidential memorandum.
54.6 The confidential memorandum serves a variety of purposes. It recorded the
instructions for a new will for Charles, it recorded that a binding nomination was
necessary and it recorded that, for present purposes, it was his binding nomination
form. The percentages of the death benefit entitlement and the beneficiaries of
those wishes remained the same as it had always been.
54.7 By an order of the Court, the confidential memorandum was admitted to probate
as representing the last will and testament of Charles. The Court did not decide
what the document meant, only that it was a sufficient record of Charles’
testamentary intentions and was in sufficient form to be admitted to probate.
54.8 At the time of the death of Charles, the members of the fund were Charles and his
wife Isabelle. They were the trustees of the superannuation trust. After the death
of Charles, Isabelle as the sole member, appointed a company DEF Pty Ltd to be
the trustee (hereinafter called “the trustee”). Isabelle is the sole director and
shareholder of the new trustee.
54.9 Charles had been the principal contributor to and principal beneficiary of the fund
up until 2004. In 2003, Charles and Isabelle were appointed the trustees of the
fund. Charles was nominated as the principal of the fund.
17. 17
54.10 During the lifetime of Charles, Isabelle did not ever see the confidential
memorandum.
54.11 Throughout his life, Charles kept strict control of the finances of the family
business and in particular in his relationship with Isabelle. Generally, Isabelle
was informed of any financial matters on a “needs to know” basis.
55. At the time that the binding nomination paragraphs were inserted into the confidential
memorandum, the solicitor who prepared the documents did not have in his possession a
copy of the relevant trust deed. That deed had been amended by a deed of variation in
2003. This deed of variation and all the details connected with it were organised by
Charles with other solicitors.
56. The deed of variation was in fact a standard self managed superfund deed of a large legal
firm. It is unknown what thought was given by those solicitors to the specific matters
relative to the needs of Charles.
57. Isabelle and the children of Charles of the first marriage are at odds. Isabelle has
announced insofar as it is in her capacity to do so through her control of the trustee she will
take the whole of the benefit to herself.
58. Under the definitional terms of this SMSF, a binding nomination form was defined to mean
the binding nomination form referred to in clause 9.5 and in the form set out in Schedule 2,
or in such other form as the trustee may accept from time to time. The other definitional
provisions are unremarkable and are generally standard e.g. dependent, member, nominated
dependent, relative and the like.
59. Turning to the operative provisions, the relevant provisions in respect of the benefits clause
reads as follows:-
“Subject to the provisions of this deed, a benefit equal to the members plan credit will
become payable in respect of a member if:
18. 18
(a)
(b)
(c)
(d)
(e) The member dies.”
60. Under the payment of benefits provision the following trust deed terms apply:-
“Where any benefit becomes payable to or in respect of a member or former member
pursuant to this deed or the member or former member is not alive when the benefit is
to be paid:-
(i) Where the member has completed and served upon the trustee a binding
nomination form, the trustee must pay or apply the benefit to or for the benefit of
the persons, and in the proportion set out in that binding nomination bind; or
(ii) Where the member has not completed a binding nomination form, or has
completed a binding nomination form but all or part of it is ineffective or void, the
trustee must pay or apply the benefit to or for the benefit of such one or more of:-
(A) The nominated dependants;
(B) Any other dependants; and
(C) The legal person or representatives;
as determined by the trustee in his absolute discretion and in the manner and at
the times by the instalments and in such proportions between them as the trustee
determines in its discretion.” (My underlining)
61. The trust deed also contains the following (standard) terms:-
“No beneficial interest:
Notwithstanding any provision of this deed, no member or any other person entitled
to be paid a benefit from the fund will have or require any beneficial or other interest
in a specific asset of the fund or the assets of the fund as a whole while such asset or
assets remain subject to the provisions of this deed.”
62. In the context of that standard deed, let us consider the difficulties that arise in relation to
the (standard) problems that very often occur in families. Isabelle has no relationship with
the children of Charles and she is of the view that Charles has significantly “short
changed” her in relation to the distribution of his estate. Isabelle is determined to “have
her day”.
19. 19
63. And when she arranges for the appointment of the corporate trustee, she also announces
that it is her intention that unless she is prevented from otherwise doing so, she will
determine, in her sole discretion, to pay the whole of the benefit under the superfund to
herself when she is entitled at turning age 60.
64. No doubt under advice, Isabelle forms the following views:-
64.1 The confidential memorandum, although it contains the wishes of Morris in
relation to a binding nomination, is not a form contemplated under the terms of
the trust deed. It is not a binding nomination form as prescribed in Schedule 2 of
the deed. Moreover, it is not has been accepted by the trustee.
64.2 Secondly, Isabelle maintains that the nomination form has not been served upon
the trustee and that being the case, the document is ineffective and void and it is
entirely a matter for her how the benefit is to be applied.
65. There can be no contest that the confidential memorandum is not in a form set out in
Schedule 2 but Charles was in control of his own personal superannuation fund since 1978.
At all times he had made nomination for the distribution of his member’s benefit upon his
death since at least 1990 and certainly since 1993 and in that respect he had always ensured
that his wife and two children shared in the benefit in the proportions that he decided.
Notwithstanding this, (and obviously as a result of the animosity between Isabelle and
Charles’ children), Isabelle has decided to give none of the benefit to the children of
Charles.
66. The issues give rise to interesting questions. The first is whether the expression within the
deed relating to the binding nomination of “…or in such other form as the trustee may
accept from time to time” means that a document will amount to a binding nomination
form if it is in a form which the trustee in fact accepts when served upon it or alternatively
20. 20
whether it really means that a document will amount to a binding nomination form only if
it is in a form which the trustee has promulgated as an acceptable form from time to time.
67. Isabelle contends that the latter construction must be correct because if the former
construction is correct, a subsidiary question arises as to whether the enquiry is simply
factual (has the trustee accepted the form?) or whether the definition clause impliedly
imposes some obligation upon the trustee to give consideration to the acceptance of the
form.
68. The second question which Isabelle contends arises is whether the form was completed and
served upon the trustee. Isabelle contends that this involves questions of objective
construction of the deed and the objective characterization of the confidential
memorandum.
69. There are some basic and essential rules. A deed must be construed in order to ascertain
the intention of the settlor. The principles applying to construction have been described as
follows:-
“The Court whose task it is to discover [the intention of the settlor] starts by applying
the usual canons of construction; words must be given their usual meaning, the
clause should be read literally and in accordance with the ordinary rules of
grammar…it is then the duty of the Court by the exercise of its judicial knowledge
and experience in the relevant matter, by the application of commonsense and a
desire to make sense of the settlor’s and parties’ expressed intentions, however
obscure and ambiguous the language that may have been used, to give a reasonable
meaning to that language if it can do so without doing complete violence to it.”30
70. In construing trust instruments, a Court should adopt an approach which is practical and
purposive, rather than detached and literal.31 The issue is what is a practical and purposive
approach which is not detached and literal? Does that approach militate in favour of an
approach which recognises that in the context of superannuation, there is a premium upon
30
Re Gulbenkian’s Settlement Trusts [1970] 508 at 522 applied in Mettoy Pension Trustees Ltd v Evans [1991] 2 All ER 513 at 538 cited in
Jacob’s Law of Trusts in Australia (7th Edition 2006) LexisNexis Butterworths Sydney.
31
Mettoy Pension Trustees Ltd (supra) cited in Jacob’s above.
21. 21
certainty of operation? To give a practical and purposive construction to a trust instrument
mean that only a certainty of operation is attainable or is there some breadth of movement?
71. If it is to be said that superannuation funds need to be administered by trustees and benefits
to be distributed, by hypothesis, in the absence of any contemporaneous assistance from or
clarification by a relevant member, does this mean that a deed should not be likely
construed in a way which contemplates that the trustee will waive or must consider waiving
irregularities?
72. In that context consider the question of service. At the time that the confidential
memorandum was prepared, Charles saw the document, discussed it with his solicitor,
signed it in front of two witnesses and took it away with him. At the time Charles was a
trustee and Isabelle was the other trustee. For reasons known only to Charles, he did not
discuss it with Isabelle. Even so, does that mean or can it mean that the document was not
served on the trustee? What is the commonsense, practical and purposive consideration
here?
73. Commonsense would dictate that the document has been served upon a trustee. Whether it
has been served upon both trustees may only been an issue between trustees that is the
subject of a complaint of one against the other. The artificiality of that argument is
obvious: to fulfill some other obligation Charles would only need to pass the document
from his left hand to his right hand. It must be a consequence of requiring a member to be
a trustee that the knowledge of the member is the knowledge of the trustee. It is impossible
for a member/trustee to bifurcate himself or herself.
74. Under the payment of benefits provision it appears that the member has completed and
served upon the trustee a binding nomination form. In those circumstances the trustee must
pay or apply the benefit to or for the benefit of the persons as set out in the binding
22. 22
nomination form. Isabelle argument is diametrically opposed to this approach: there is no
proper form, there is no agreement to this form, it has never been served and it binds no-
one.
75. However, anyone approaching the interpretation of these provisions must be extremely
careful to note carefully the precise words used. In my opinion it is too simple merely to
point to words and allege that they only have one meaning; the deed is in a sense a “living
document”.
76. In the example of the deed covering the self managed superfund of Charles and Isabelle,
under the payment of benefits on death clause, the benefit is a benefit which becomes
payable to or in respect of a “member or a former member”. Member is defined in the
deed as follows:-
“…A person who has been accepted by the trustee as a member of the fund and who
has not ceased to be a member and includes a person in receipt of a pension from the
fund.” – (presumably a person who is alive)
One would expect and that the “person” is a member under the deed and the benefit
becomes payable to the member pursuant to the deed.
77. However when one looks at the terms of the payment clause the benefit must become
payable to or in respect of a “member or former member pursuant to this deed and the
member or former member is not alive when the benefit is to be paid”.
78. In my opinion, the provision reflects the practicality of what I would call a deathbed
nomination: that is it presumes a time lag between being the time of a benefit being
payable and when it is to be paid. There is an intervening period and in that period, where
there is a member, a benefit becomes payable to a member who is not alive. This can only
be when the member has died and the right is not instantaneous because of the use of the
words “when the benefit is to be paid”. It recognises a time lag between the two things so
23. 23
that by the date when the benefit is to be paid, as long as the existing trustee has been
served with a binding nomination form, then the trustee is bound to pay in accordance with
the nomination form.
79. As the member, Charles, the deceased, completed and signed the confidential
memorandum. As a member, he made his decision, committed his wishes to writing and
signed the document in accordance with Regulation 6.17, 6.17A and 6.22. At that time, as
a trustee, Charles was served. It is no different from the exception under the
superannuation law of declaring a trust for himself.
80. Therefore, under this argument on the interpretation of this clause, when any benefit
becomes payable in respect of the member and the member is not alive, then a benefit is to
be paid. Therefore, (the argument follows) if the benefit did not become payable in respect
of Charles until Charles’ death and notice to the trustee had been given (and Charles had
notice of the trust deed prior to his death), then there had to be notice to the other trustee
before it would be paid.
81. All that was then required was for Isabelle as the other trustee to receive notice before it
was to be paid. That is why the expression “is to be paid” is used in contradistinction to the
word “payable” in the first part of the clause. It contemplates a future event and it
contemplates a possible difference between being payable and being paid.
82. When one looks at the clause in that light, the members’ planned fund will become payable
in respect of the member if the member dies. There is no prescription that there was an
immediate crystallisation of a right, that is simply that the benefit will become payable if
the member dies and the sub-paragraph operates in the following terms:-
“The member not being alive and the benefit still to be paid and if at that time there is
service upon the trustee of the form, the trustee must pay”. [That is the practical
operation of the clause].
24. 24
83. The argument follows that, recognising the difference between the terms “becomes
payable” and “needs to be paid”, when a completed binding nomination form has been
served, the trustee must pay upon the benefit. If there was an effective notice after death to
Isabelle, then her obligation to pay followed on becoming aware of the terms of the
nomination.
84. This interpretation is borne out by a proper reading of sub-paragraphs (ii). In that sub-
paragraph there is no mention of any question of service. Service must be inferred but the
poverty of the drafting technique becomes so very obvious when one compares sub-
paragraphs (i) and (ii). There is no proper interconnection between the two paragraphs
having regard to the differences in meaning of a “benefit becoming payable” and when the
“benefit is to be paid”.
85. The summary of the position is that technical arguments have their own reward. Moreover,
when one looks closely at any trust document it behoves the reader to look closely at the
words of the document and not, too quickly, come to a conclusion about them.
86. That in turn leads to a practical consideration of a factual circumstance which arises in
Adelaide32 not less than 100 times per year (as I am told) to legal practitioners involved in
wills, estates and superannuation. That practical example, to be considered in light of the
arguments put by the trustee in the case of Charles and Isabelle, is one that will be very
familiar to practitioners here.
87. Take as an example, a call made to a legal firm to quickly attend at a hospital upon a
person who is ill and who wishes to give instructions for a will. The experienced
practitioner will go to the hospital armed with a number of “weapons”. The first is the
knowledge that the new “client” has not previously given instructions to the firm, nothing
32
And it has been suggested to me that the occurrence of these events is calculable by using as a multiple of this figure, the number of
millions of the population in each place in Australia.
25. 25
is known of the client’s background, nothing is known of the dependants, family and other
circumstances of the client, nothing is known of the testamentary capacity of the client.
Also, nothing is known of the following matters:-
87.1 What previous wills the client has made;
87.2 Whether the need for a new will arises out of circumstances that requires separate
advice;
87.3 Whether the client has sufficient testamentary capacity to understand everything that
is to be done in respect of his or her wishes;
87.4 Whether the client has a self managed superfund.
88. Assume for the sake of discussion that upon arrival at the hospital, it is apparent that the
client is seriously ill but of capacity. The solicitor runs through with the client the whole of
the client’s wishes in relation to his will. The solicitor takes the time to take initial
instructions and makes significant notes in relation to those instructions. The solicitor then
takes the time to write out in detail the client’s testamentary wishes, his wishes in relation
to the executor of the estate, the beneficiaries of the estate and dealing with specific
testamentary wishes and the residue of his estate. The solicitor ensures that the written
instructions are then signed by the testator in the presence of two independent witnesses
and is dated.
89. When the solicitor is about to leave the hospital room, the solicitor asks the new client
whether he has a self managed superfund. His eyes widen, yes he does. The solicitor asks
the client whether or not the client has considered a binding death benefit nomination for
dealing with his member benefits under that self managed superfund. The client says that
he has not. The client informs the solicitor that he and his wife are now significantly
estranged, his wife is the co-trustee and co-member of the self managed superfund and his
26. 26
desire is to leave his death benefit which is the substantial portion of the accrued benefit
under the superannuation fund to his wife as to one-quarter and to his two children as to the
other three-quarters. He certainly does not want to leave his wife completely in charge of
the superfund because she is estranged from their children due to her having embraced her
new religion of “profligacy”. He is satisfied that having left the whole of his estate to her
(in a controlled way) that he has made sufficient provision for her in his will.
90. The solicitor asks the client whether he has ever seen a binding death benefit nomination
form under his trust deed. The client says that he can hardly remember ever seeing a trust
deed. He knows that one was done about 10 years ago but he has always left it to an
accountant or financial advisor to deal with. The solicitor cannot make contact with any
advisor to ascertain the requirements of the relevant trust deed. The solicitor asks the client
whether or not he would wish to make a binding nomination form. In a moment of lucid
prescience the client agrees.
91. The solicitor produces his firm’s standard binding nomination form. It is later ascertained
that it is not in accordance with the strict requirements of the trust deed. The solicitor
arranges for this binding nomination form to be completed by the client and to be executed
by the client in the presence of two independent witnesses. The solicitor puts the binding
nomination form into his file and carries it back to his office. As he enters the office
carpark his mobile phone rings. The client has died. The essential questions arising out of
this factual scenario are the following:-
91.1 What relevance is the intention of the deceased to make a binding nomination? ;
91.2 What are the terms of the trust deed and do they formulate a prescription of form that
is immutable? ;
91.3 What really is the significance of service upon a co-trustee of this BDN? ;
27. 27
91.4 What action is sufficient to constitute service? ;
91.5 Why would a Court exercising equitable jurisdiction33 interfere with the clear
expressed intentions of the deceased at the behest of someone who has only their
personal interests at heart? ;
91.6 Why in these circumstances is the prescription for service only to be read as service
prior to death and what (using the purposive and flexible approach) is the reason for a
Court of equity to deny the beneficiaries of such clearly expressed intentions because
of form?
92. The solution to these difficulties is not easily ascertained. Too often in my view matters are
left to a decision on “questions of fact” that in turn require the expenditure of enormous
expense in Court costs and the creation of tremendous heartache and friction between
family members and others who are dependants.
93. A solution may be to legislate for a minimum standard DBN so that if a form achieves that
standard, then it will be effective for all purposes. That approach, to an extent, falls foul of
the “sanctity of the trust deed provisions” theory that requires a proper adherence to trust
deed provisions. This theory is grounded in principle as well as a long history of practical
experience that requires form and substance provisions in a deed to be observed so that the
trustee and the beneficiaries have a sufficient level of certainty in respect of the trust deed,
the conduct of the trustee and for the trustee’s own security and peace of mind. It is very
difficult to perceive the Commonwealth Parliament attempting to legislate in this fashion as
it will not wish to legislatively redraw trust deeds.
94. In my opinion one of the weaknesses of the approach of Cooper is that his focus in this area
was on concepts of unfairness in changing circumstances akin to notions of inheritance
33
Cf Donovan v Donovan 2009 QSC per Fryberg J.
28. 28
provisions that are refashioned by a Court depending upon the needs and circumstances of
a potential beneficiary of the deceased estate. The unfairness arises (according to the
statutes) because no or no proper provision is made for [the maintenance education or
benefit according to need] of that beneficiary and Parliaments in their wisdom have
allowed the Courts to redraw the terms of the testamentary dispositions of the deceased
under the very wide discretion given by Statute to allow a benefit to that claimant
beneficiary.
95. In my view Cooper’s recommendation is the second step in the process. The first step must
be to ensure that the form of DBN used by a deceased is recognized as binding upon the
trustee even if it does not perfectly comply with the trust deed terms.
96. This approach in turn requires a wholesale change to the approach taken thus far to the
drawing of trust deeds. We must keep steadily in mind that these are superannuation trusts.
They are different—if only because a person is statutorily authorized to declare a trust in
favour of himself. And if we really properly understand that difference we can then ask the
obvious question: why are so many trust deeds drawn in such a prescriptive way that in the
area of DBNs no room for movement is left in the determination about what is both
sufficient and necessary? What is the underlying reason for a trustee in a closely held
private trust (such as an SMSF) insisting upon a form or of knowledge about what that
person does with his benefit after his death?
97. I can make a binding and final will and not tell my wife or family. Why must a DBN
operate any differently as if it was some form of holy writ bound up in a form of
ceremonial process that provides the “passport” to enter the Elysium Fields34?
34
The fields (that were a state of ideal happiness) at the end of the earth to which certain favoured heroes, exempted from death, were
conveyed by the gods.
29. 29
98. If a Court is able to divine out of a series of papers and events the testamentary intention of
a deceased in respect of his estate, is it so anathema to principle, the logic of the law and
ordinary common sense that the form of a DBN used by a deceased that does not fully and
literally comply with a promulgated or some other agreed form remains operative and
effective in respect of that deceased member’s benefit? Is not the issue here the same as it
is under a contention about what constitutes a will? In my opinion the answer is an
emphatic yes. This is even more dramatically so when it is understood that trust deed
prescriptions about the form of DBNs appear to have their genesis in the strictness and
formality of the older retail and industry funds that dealt with multiples of members across
a very broad range of benefits.
99. In my opinion the correct approach is for two things (the first in relation to the contents of
the trust deed and the second in relation to amendment of statute) to occur as follows:-
99.1 First: a completely different trust deed drafting approach be taken to DBNs that
entails a minimalist requirement about what constitutes and is necessary to constitute
a DBN that recognizes, for example that a DBN may be included in the terms of a
will. This requires the terms of the trust to be amended to recognize that there is
minimal standard to be achieved in the preparation of a DBN. A form that complies
with SISR 6.17A(6) must suffice;
99.2 Whilst it is accepted that it is preferable for the other trustee/director to be given
notice of the DBN and that this should be the usual approach, it not be necessary for
an effective DBN that the form used be served upon a co-trustee/co-director prior to
death and that it is sufficient if the notice comes to the attention of the surviving
trustee before distribution of the benefit of the deceased member; and
30. 30
99.3 Second: that all relevant statutes and regulations be amended to give the Court power
to hear and determine any claim by a surviving dependant for further provision from
the member’s benefit according to that dependant’s claim for maintenance education
or advancement based upon need.
100. It is also my opinion that unless there is a significant change of the drafting approach to
SMSF trust deeds (that I think may have been dominated by slavery to precedent rather
than good drafting practice), SMSFs will soon become embroiled in litigation of the type
that has dominated the lives of those who practice in the area of wills and estates. That
tragic result must be avoided by the application of further attention to detail, common sense
and a willingness of Parliament to legislate in a complementary way. This does not ask for
the Elysian fields but they may be easier to attain.