Changes in composition + value of estate and/or super account balance over time can result in the children being treated unequally.
At times, even the best intentions of a deceased can be overturned by unexpected developments. But there are solutions which should be considered when a will is being drawn up.
Take the case of a parent who wants to equally benefit their two children, their son through their estate and their daughter through payments from their SMSF using a binding death benefit nomination.
But changes in the composition and value of the estate and /or super account balance over time can result in the children being treated unequally.
Then disputes result that give rise to family provision claims on the estate, including the invoking of NSW “notional estate” rules. When this occurs, the amount paid out of the deceased’s super could end up being greater than gift made under the will.
One solution to stop this occurring is for the parent to make a gift to their son under their will, conditional on the value of the super (which will benefit their daughter) being at least of a certain amount.
That way, if the super is less, then the amount of the will gift to the son might be reduced so that a compensatory gift can be made to the daughter whose inheritance would otherwise be solely funded from the SMSF.
The will would need to include a general adjustment clause to enable the executors to make appropriate changes.
Alternatively, the parent could make a binding death benefit nomination in favour of their daughter which is subject to a condition that the value of the parent’s personal estate is at least of a certain amount.
If it is less, then the amount of the super death benefit paid to the daughter might be reduced so that a compensatory death benefit payment can be made to the son whose inheritance would otherwise only be funded from the parent’s personal estate under their will.
It would also be prudent to ensure that, in the event that a member became incapable, the person that they appoint under their enduring power of attorney is someone who would be able to work harmoniously with the surviving member(s) of the SMSF if that person took the incapacitated member’s place as a trustee or a director of the trustee.
Media enquiries
Brian Hor
Special Counsel – Estate Planning & Superannuation
Townsends Business & Corporate Lawyers
02 8296-6203 0401 122 338
brian@townsendslaw.com.au
townsendslaw.com.au