We agree too many pensions are established with the sole priority of being able to take money from the fund (pension payments).
A complete lack of documentation or pension agreement provides the SMSF trustees with no direction when the members circumstances change.
As stated by Clinton Jackson in SMSF Advisor, the lack of formal documentation doesn’t provide answers to the following;
– When does a TRIS cease to be a TRIS?
– Is the pension established with a reversionary beneficiary as outlined in TR 2013/5?
– What direction does a trustee have if a member has a reversionary pension and also a binding nomination and they are not consistent?
The lack of formal documentation or in legal terms inadequate documentation used when commencing a pension could expose the advisor to unwanted complexities especially if the advice to commence the pension came from an unlicensed source.
The legal advice received by SMSF Works suggests that having a compatible trust deed and formal pension agreement between the trustees and the member will provide the trustees with the direction to deal with a variety of changes that the member may encounter over the life of the pension.
The benefits of providing the appropriate advice in the correct form supported by carefully drafted documentation should never be underestimated. Where’s the upside in taking short cuts? The client will not remember you saved them a few hundred dollars if there is a problem at a later date.
The changes effective 1 July 2017 will require a review and possible restructure of a great many pensions. This is the perfect opportunity to review all existing pension documents and rectify any unintended consequences. Contact us today for a free consultation.