SMSF Deed History Review

Why should you request an SMSF Deed History Review?

Almost all SMSF strategies and arrangements rely on a ‘firm foundation’ being the trust deed and governing rules. Like a house, unless you have a firm foundation, the house may prove shaky and be blown down by rough weather. Having a robust deed is very important for many SMSF strategies including pensions, binding death benefit nominations (BDBN), and determinations of who eventually gets control of the fund on death, separation of a relationship, and in a dispute. Thus, it is important to ensure the fund’s governing rules provide a firm foundation for every SMSF.

Note that an SMSF’s governing rules also require all prior deeds, rules, and change of trustees to be validly effected, prepared, witnessed, executed, and, if necessary, stamped, in compliance with prior variation powers, relevant consents, and appropriate legal formalities. All these formalities must have been complied with in the document trail otherwise the fund’s governing rules may be invalid and ineffective.

Overview

The SMSF Deed History Review includes a review of the deed of establishment, any subsequent deeds of variation and deeds of change of trustee. We review the full deed history of the SMSF to determine if there are any issues that require remedial work to minimise future risks.

Remedying any issues in a timely manner is often far more cost and time effective than being exposed to legal challenge, ATO scrutiny, or other risks and uncertainty later. Also, banks and financial institutions are very strict on seeing a full and valid document trail before they lend to an SMSF trustee or undertake certain other transactions. This review is also important to provide valid and legally effective BDBNs and automatically reversionary pensions. If any further work is recommended, we provide an estimate for this work in our report.

This review assists in minimising potential issues, for example:

• disputes regarding BDBNs or a planning strategy undertaken by a trustee;
• ATO scrutiny, audits, etc;
• legal challenge by beneficiaries (including beneficiaries who are not members);
• bank scrutiny, eg, when lending to the SMSF for a limited recourse borrowing arrangement; and
• uncertainty regarding the fund’s succession planning strategies.

The cost of the review may assist in overcoming potentially costly and embarrassing situations. Any dispute or litigation in respect of a fund’s governing rules can many cost thousands of dollars and take years to resolve. Moreover, the money in the SMSF may go to people who the member(s) did not intend to benefit.

For more information and related articles

For more information on the importance of having a sound SMSF deed and related documents – click on the articles listed below:

• DBA Lawyers’ lost SMSF deed service
• DBA Lawyers’ SMSF governing rules
• The legal minefield of BDBNs (updated)
• Reconciling inconsistencies between reversionary pension nominations and BDBNs
• An important reminder when drafting deeds: Wilstead No. 5 Pty Ltd v Smyth [2020] VSC 651
• Sutton v NRS(J) Pty Ltd [2020] NSWSC 826: Lessons for managing lost trust deeds
• Dealing with a lost SMSF trust deed