The Supreme Court of Western Australia recently handed down its decision in the case Ioppolo & Hesford v Conti. The case highlights the importance for will makers when attempting to bequeath entitlements to self managed superannuation fund (SMSF) pursuant to a will.
Mrs Conti and her husband established a SMSF in 2002. Mrs Conti and her husband were the only members of the fund. Mrs Conti prepared a Will dated 13 January 2005. Mrs Conti attempted to give her entitlements of her membership of the SMSF to her children. She specifically stated in her Will that she did not want any entitlements to be paid to her husband.
Mrs Conti passed away on 5 August 2011. At the time of her death there was no binding written direction from Mrs Conti to the trustee of the SMSF as to the payment of her membership entitlements. The sole remaining trustee of the SMSF at the date of Mrs Conti’s death was her husband.
Following the death of Mrs Conti, Mrs Conti’s husband remained the sole trustee of the SMSF. Mr Conti exercised his powers under the terms of the SMSF and a new trustee company was appointed the sole trustee of the SMSF. Mr Conti was the sole shareholder and director of the new trustee company (Augusto Investments Pty Ltd). Augusto Investments Pty Ltd then resolved to pay the whole of Mrs Conti’s death benefit to Mr Conti in accordance with the rules of the SMSF.
The executors of Mrs Conti’s estate filed proceedings with the Court seeking relief on 4 main points:
- that Mr Conti was obliged to appoint one of the executors of Mrs Conti’s estate as a trustee of the SMSF;
- that Mr Conti - as sole remaining trustee of the SMSF - did not exercise his discretion in a bone fide manner as required by the SMSF deed;
- that the Executor be appointed as a trustee of the SMSF; and
- that the Court should review the discretion exercised by Mr Conti in his capacity as sole remaining trustee of the SMSF.
The Court held that the sole surviving trustee of the SMSF was entitled to ignore the direction contained in the Will. The Executors claims were dismissed.
The Court also highlighted that SMSFs are now a feature of the financial fabric of this Country and provide important vehicle through which individuals can invest for retirement.
The case highlights the importance for will makers to consider all aspects of their estate planning when preparing their Will. Will makers should consider whether a superannuation binding death benefit nomination is appropriate for their individual circumstances by seeking professional advice.