25/09/2013

A few months ago we dealt with binding death benefit nominations on the Titanic and what would happen if the super fund member and their spouse or partner were both to suddenly be deceased at the same time.  

In keeping with this scenario the question was then asked: if both members of an SMSF were to die at the same time, who appoints the legal personal representative (LPR) of the members?

To answer this, the first port of call would be to review the powers contained in the fund's trust deed in order to determine the practical implications of appointing an LPR in such an event.

Express provision in the rules of the fund

Upon the death of an individual trustee the trust deed may provide for the LPR for each trustee to automatically assume the position of trustee. The rules may provide for the LPR to be automatically deemed as being appointed as a trustee upon the death of a member.

Two practical issues that arise are:
1.    Most likely the two members, being Mum and Dad, have appointed each other as their LPR.  Whether an alternate person has been nominated to act as LPR would need to be determined by reviewing each member's enduring power of attorney.
2.    The other issue is that unless and until probate has been granted, the individual(s) named in the Will as the deceased's executors have no legal authority to deal with the assets of the deceased.  Once granted their legal authority to deal with assets is backdated to the date of death.  

While a deed of appointment may not be necessary to effect the appointment of the LPR, if there is real estate in the fund or if there are likely to be conflicts or disagreements, a deed of appointment should be signed and registered.  This deed would be pursuant to the trustee appointment powers conferred by the relevant Trustee Act, or if those powers don't apply, by the Court upon application of an interested party.

No express provision in the rules of the fund

Should the rules not have an express provision appointing the LPR of a deceased trustee then appointment will be by the Executor of the Estate once probate has been granted.

In the case where there are two trustees and each dies without the order of death being known - the elder trustee is presumed to have died first and be survived by the younger trustee, which means:

1.    if legal title to any fund asset is held as tenants in common - the LPR for each Member holds that Member’s interest as bare trustee for the succeeding trustee(s) of the Fund; and

2.    if legal title to any fund asset is held as joint tenants – the LPR of the elder trustee ceases to have any interest as legal title has transferred by way of survivorship to the younger trustee.

The succeeding trustees of the SMSF may take some time to be identified and appointed.  Legal title in the meantime is held by the LPR as bare trustee for the succeeding trustees of the fund.  However, this is not taken as the LPR being appointed as the trustee of the SMSF.

The succeeding trustees will be appointed by the mechanism set out in the Governing Rules. If there is no mechanism set out in the Governing Rules an interested party (such as the LPR of the younger trustee) would have to apply to the Court for directors and orders for the appointment of succeeding trustees.

The issues associated with the appointment of an LPR on the death of a member/trustee are not without complexity which can be greatly reduced by a good trust deed incorporating appropriate provisions.   

We provide such trust deeds both directly and indirectly through our client, SUPERCentral Pty Limited, so should you have any queries or wish for us to provide you with further advice in relation to appointing a LPR for you or your clients, please contact Townsends Business & Corporate Lawyers on (02) 8296 6222.