Topdocs accommodates new death benefit strategy
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Darin Tyson-Chan is a journalist with InvestorDaily, a Morningstar publication.
Specialist self-managed superannuation fund (SMSF) document provider Topdocs has incorporated a new feature in the trust deeds it prepares to facilitate a better solution for death benefits.
The newly added element to Topdocs' SMSF trust deeds is a provision for the appointment of a death benefit guardian.
Topdocs has included this feature in its SMSF documentation in response to perceived inadequacy of other measures available to protect superannuation benefits upon the death of a member.
"Being able to appoint a death benefit guardian will enable them to plan the flow of benefits, knowing they have additional oversight not available in other circumstances," Topdocs national manager for training and advice Michael Harkin said.
"The death benefit guardian is generally a trusted friend, relative or a professional adviser, whose role is not to act as trustee but to ensure benefit payments are made as intended, regardless of who the trustee is at the time.
"Because death benefit guardians must approve the death benefit payment before the SMSF trustee can pay them, they provide an additional layer of certainty for the member and their loved ones."
Alternative benefit protection strategies to deal with the death of a member included putting a binding death benefit nomination (BDBN) in place, however, this was not without its problems, according to Harkin.
"Lack of validity could stem from the BDBN not being signed or witnessed in accordance with the requirements of the SMSF deed or legislation. Alternatively, the directions in the BDBN might not be legally allowed. For example, directions might be given to pay a child a pension but superannuation law precludes that child from receiving a pension," he explained.
For those trustees who would rather allow the executor of the will to manage the situation, Harkin warned the time it took to actually appoint the executor could allow superannuation benefits to have been allocated away by the fund trustees in the meantime.
Trustees wanting to appoint a death benefit guardian will have to fill out a form that is required to be signed by them as well as the nominated guardian.