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Providing innovative procurement solutions for local government projects April 20, 2018

We advised City of Casey on the procurement process of the Bunjil Place Project. Bunjil Place is a $125 million civic and cultural precinct for the City of Casey, encompassing an 800-seat theatre and 200-seat … Continued

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Maddocks signs on for Luminance AI platform May 24, 2018

Thursday 24 May 2018 Maddocks has adopted an artificial intelligence (AI) platform to assist in streamlining due diligence processes. The firm has signed on to use the market-leading Luminance AI platform to provide due diligence … Continued

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Strategic use of regulatory action policies: an example in the context of Freedom of Information May 23, 2018

Regulatory action policies (including strategies and statements issued by regulators) are a useful tool for regulators to signal the importance of a particular regulatory area to the regulated sector and to the public at large. … Continued

Katz v Grossman revisited

Despite the wide industry knowledge of the Katz v Grossman case that highlighted the importance of control over self-managed superannuation funds (SMSF), the recent decision of the Supreme Court of Western Australia in Ioppolo & Hesford v Conti [2013] WASC 389 shows that similar situations still occur. Both cases highlight the importance of effective estate planning, particularly when there is an SMSF holding a significant amount of the client's overall wealth.

What was Katz v Grossman?

Since the 2005 decision of the Supreme Court of NSW in Katz v Grossman, the case has been discussed in many articles and seminars relating to superannuation and estate planning. In the Katz v Grossman case, the deceased left a son and daughter. The deceased's will provided that his estate assets were to pass equally to his two children. Part of the deceased's wealth included about $1 million in an SMSF. Following the death, the SMSF was in the control of the daughter. The daughter caused the deceased's superannuation death benefit to be paid directly to her, and not to the deceased's estate. Accordingly, the son did not receive half the superannuation as intended by the deceased. The Court determined that the daughter was legally able to do this.

The circumstances of Katz v Grossman highlighted the importance, from the perspective of estate planning, of:

  • how control of an SMSF passes in the event of the death of a member/trustee
  • the importance of considering the relationship between binding death benefit nominations and a deceased's will.

As highlighted below in the recent decision by the Supreme Court of Western Australia in Ioppolo & Hesford v Conti [2013] WASC 389, similar situations are still occurring. 

Recent case – Ioppolo & Hesford v Conti

In Ioppolo & Hesford v Conti the deceased (Francesca Conti) had made her will and purported to leave all her superannuation entitlements to her children. She specifically stated that she did not want any superannuation entitlement paid to her husband (Augusto Conti). At the time of Francesca's death she and Augusto were the trustees of an SMSF. Following Francesca's death, Augusto retired as a trustee and appointed a corporate trustee (which was controlled by him) as the new trustee of the SMSF. The new trustee decided to pay Francesca's death benefit of $648,586 to Augusto.

Francesca's children (in their capacity as executors of her estate) took action against Augusto and the corporate trustee but failed. In particular, the executors argued that as specified in section 17A of the Superannuation Industry (Supervision) Act, they were entitled to be appointed as co-trustees of the SMSF. Had they been appointed co-trustees, they may have been able to influence the decision in relation to the payment of the death benefit. The Court found that whilst section 17A allowed an executor to be appointed as a co-trustee, it was not mandatory that the appointment be made. The executors argument that the SMSF trustee had not acted bona fide in ignoring the wishes expressed in Francesca's will was also rejected.

The Court noted that this case illustrates how problems can arise in a family and lead to disputes relating to an SMSF and death benefit. Francesca's failure to properly document her wishes in relation to the payment of her superannuation death benefit arguably resulted in a substantial financial and emotional cost to her children.

Lesson to be learnt

The Conti Case and Katz v Grossman highlight the special issues involved in estate planning where there is superannuation (and particularly an SMSF) and the importance of thinking through the issues and tailoring an appropriate solution.

For more information about your estate planning, particularly where there is superannuation (and specifically an SMSF) involved, please contact a member of Maddocks Private Client Services Team.

Despite the wide industry knowledge of the Katz v Grossman case that highlighted the importance of control over self-managed superannuation funds (SMSF), the recent decision of the Supreme Court of Western Australia in Ioppolo & Hesford v Conti [2013] WASC 389 shows that similar situations still occur. Both cases highlight the importance of effective estate planning, particularly when there is an SMSF holding a significant amount of the client's overall wealth.

What was Katz v Grossman?

Since the 2005 decision of the Supreme Court of NSW in Katz v Grossman, the case has been discussed in many articles and seminars relating to superannuation and estate planning. In the Katz v Grossman case, the deceased left a son and daughter. The deceased's will provided that his estate assets were to pass equally to his two children. Part of the deceased's wealth included about $1 million in an SMSF. Following the death, the SMSF was in the control of the daughter. The daughter caused the deceased's superannuation death benefit to be paid directly to her, and not to the deceased's estate. Accordingly, the son did not receive half the superannuation as intended by the deceased. The Court determined that the daughter was legally able to do this.

The circumstances of Katz v Grossman highlighted the importance, from the perspective of estate planning, of:

  • how control of an SMSF passes in the event of the death of a member/trustee
  • the importance of considering the relationship between binding death benefit nominations and a deceased's will.

As highlighted below in the recent decision by the Supreme Court of Western Australia in Ioppolo & Hesford v Conti [2013] WASC 389, similar situations are still occurring. 

Recent case – Ioppolo & Hesford v Conti

In Ioppolo & Hesford v Conti the deceased (Francesca Conti) had made her will and purported to leave all her superannuation entitlements to her children. She specifically stated that she did not want any superannuation entitlement paid to her husband (Augusto Conti). At the time of Francesca's death she and Augusto were the trustees of an SMSF. Following Francesca's death, Augusto retired as a trustee and appointed a corporate trustee (which was controlled by him) as the new trustee of the SMSF. The new trustee decided to pay Francesca's death benefit of $648,586 to Augusto.

Francesca's children (in their capacity as executors of her estate) took action against Augusto and the corporate trustee but failed. In particular, the executors argued that as specified in section 17A of the Superannuation Industry (Supervision) Act, they were entitled to be appointed as co-trustees of the SMSF. Had they been appointed co-trustees, they may have been able to influence the decision in relation to the payment of the death benefit. The Court found that whilst section 17A allowed an executor to be appointed as a co-trustee, it was not mandatory that the appointment be made. The executors argument that the SMSF trustee had not acted bona fide in ignoring the wishes expressed in Francesca's will was also rejected.

The Court noted that this case illustrates how problems can arise in a family and lead to disputes relating to an SMSF and death benefit. Francesca's failure to properly document her wishes in relation to the payment of her superannuation death benefit arguably resulted in a substantial financial and emotional cost to her children.

Lesson to be learnt

The Conti Case and Katz v Grossman highlight the special issues involved in estate planning where there is superannuation (and particularly an SMSF) and the importance of thinking through the issues and tailoring an appropriate solution.

For more information about your estate planning, particularly where there is superannuation (and specifically an SMSF) involved, please contact a member of Maddocks Private Client Services Team.