In the recent case of Re. Marsella; Marsella v Wareham (No 2), Helen Marsella was the sole member of the Swanston Superannuation Fund. Her daughter, Caroline Wareham and Helen were the trustees of the fund. Helen died on 27 April 2016.
On 17 April 2017, Caroline resolved to pay Helen’s death benefit in the sum of $450,416 to herself with the aim of avoiding the fund becoming non-complying and consequently losing its concessional tax status under the Superannuation Industry (Supervision) Act.
Ricardo Marsella, Helen’s husband of 32 years sought to set aside the distribution from the fund on the basis that Caroline did not act in good faith after giving real and genuine consideration to the dependants of the fund and in accordance with the purpose for which the power of distribution was conferred in the fund.
The court made clear that it was not its role to consider the fairness and reasonableness of the outcome of the exercise of the discretion or interfere with the role of the trustee. However, an outcome that is very unreasonable may form evidence that the discretion was never properly exercised or was exercised in bad faith.
In this case, the Supreme Court of Victoria ruled for Ricardo and removed the trustee from the SMSF after considering the relevant factors including:
- the intention of the deceased as the settlor of the fund;
- the relationship between the deceased and the dependant; and
- the financial circumstances and needs of the dependants.
The court found that the trustee has ignored Ricardo’s substantial relationship with the deceased and primarily his limited financial circumstances. It re-emphasised the care needed from the trustee in relation to the inheritance arrangements for a SMSF and in particular the welfare of the beneficiaries.
If you are unsure of your obligations as the trustee in a trust arrangement or require advice specifically in relation to a SMSF, please contact our team of experienced Tax Lawyers by clicking here to submit an online enquiry form or call us on 1300 QUINNS (1300 784 667) or on +61 2 9223 9166 to arrange a conference or appointment.