One of the benefits of SMSFs is the amount of control you have from managing it yourself. However, self-management can leave room for disputes among related parties, especially when family members are involved.
SMSF disputes can be caused by a number of factors, such as relationship breakdowns, (common in funds where parents and siblings are in a member and trustee relationship) and fundamental differences in opinions. Other common triggers for SMSF disputes include:
- investment strategy disagreements,
- differences in opinions over the payment of benefits, especially in SMSFs involving both parents and their children,
- payment of death benefit disputes, and
- disagreements on the distribution of SMSF death benefit payments between surviving members.
Consider the following methods to avoid SMSF disputes.
Clear decision-making procedures
Disagreements are bound to occur when it comes to money, so it is important to include concise decision-making provisions to keep things fair for all parties involved. For example, trustee decisions can be made by a simple majority rather than unanimously, and a particular trustee may be provided a casting vote in the case that a deadlock occurs. Provisions could also include voting rights that are based on the value of a member’s account balance within the SMSF to avoid situations where a member with minority interest out-votes a member with a large fund account balance.
Updating your SMSF regularly
A SMSF trust deed will provide provisions which determine the trustees’ rights, obligations and options. It is important to keep your SMSF and trustee information up to date to prevent any unwanted beneficiaries and claims. For example, in the case of an unfinalized divorce or legally unchanged relationship status, a former spouse can claim the others’ superannuation death benefits. To prevent such situations and avoid disputes, be sure to update your super fund regularly.