I recently read the case Ioppolo v Conti  WASCA 45 with interest. This case addresses a number of issues which need to be taken into consideration when devising a succession plan for your SMSF (SMSF Succession Plan).
In summary the facts of Ioppolo v Conti are:
The case raises a few issues that I see raised regularly:
Section 17A of the SIS Act imposes conditions on an SMSF, one of which is that an SMSF cannot have less than two individual trustees. However, it provides that an SMSF does not cease to be such a fund until after six months after the failure to meet any of the conditions.
The plaintiffs in this case (the executors of Mrs Conti’s estate) argued that the fund failed to meet the conditions in section 17A of the SIS Act.
This argument failed. There was no obligation on Mr Conti to appoint one of the executors trustee. As Mr Conti appointed a corporate trustee within 6 months of Mrs Conti’s passing, the breach had been remedied.
The best place to find out who will be the trustee upon the death of a trustee is the SMSF trust deed.
There is a common premise that an executor will automatically take the place of a deceased trustee. This is not correct.
In this case, the executors argued that the trust deed required Mrs Conti’s legal personal representative to be appointed as trustee of the SMSF.
This claim failed. The surviving trustee must act in accordance with the terms of the deed. There was no obligation in section 17A of the SIS Act or the deed requiring Mr Conti to appoint the legal representatives of Mrs Conti’s estate trustee of the SMSF.
As there was no BDBN in place, shortly after Augusto Investments Pty Ltd was appointed trustee of the SMSF, there was a decision to pay Mr Conti all of Mrs Conti’s superannuation entitlements, and none to her children.
The executors argued that Augusto Investments Pty Ltd had acted in bad faith because Mrs Conti’s specific wishes were to pay her superannuation entitlements to her children as outlined in the will.
This argument failed. The SIS Act outlines a strict regime for BDBN. As there was no BDBN, the decision of who the superannuation entitlements would be paid to was a decision for the trustee of the SMSF.
When dealing with your succession plan for your SMSF it is imperative that you seek advice in relation to any compliance issues raised in your plan. If you have any questions about your SMSF succession plan, please do not hesitate to contact me.