As the trustee of an SMSF, it is your responsibility to ensure that your SMSF is run in accordance with the law and that the interests of all members are protected. One of the key ways to do this is to understand your SMSF's trust deed. Easy to say, but many deeds are difficult to read as they are lengthy and full of jargon, so they won’t usually find their way to the top of your reading list.
Trust Deed Re-Cap
A trust deed is a legal document that outlines the rules of operation for an SMSF. It sets out the SMSF’s objectives, the trustee's responsibilities, and the rights and obligations of the members. The trust deed also determines how the SMSF will be managed, how contributions will be made, and how benefits will be paid out.
Not all Trust Deed is the same, but the information contained in an SMSF trust deed will usually include:
The names of the Members and Trustee
The objectives of the SMSF.
The types of investments that can be made
Rules that outline how the SMSF will be run, how member benefits will be paid, and the circumstances in which the SMSF will be wound up.
Why you should review your SMSF Trust Deed
You may have an SMSF Trust Deed that doesn’t require constant updating. In that case, the age of the SMSF Trust Deed becomes less important. However, many deed templates are written in a prescriptive way making them much more likely to become out of date.
As SMSF legislation is constantly changing, the older and more prescriptive the SMSF Trust Deed, the more likely it will need updating so that the Trustee can continue to operate the SMSF in accordance with the super laws.
Having an SMSF Trust Deed that you don’t understand or that doesn’t allow proper operation within the current law can result in unintended outcomes for the SMSF Members or their beneficiaries.
When to Update the SMSF Trust Deed
There are two main triggers for updating your SMSF Trust Deed, changes in legislation and changes in circumstances.
Changes in Legislation
As Trustee, you need to operate your SMSF in accordance with the Trust Deed requirements. The super laws can change in all sorts of ways, sometimes providing you with opportunities you might like to utilise, other times restricting what you can do.
Some examples of recent legislative changes are:
New work test rules
Updated Bring Forward provisions
Conversion of legacy pensions
Increase in the number of SMSF members to 6
To be in the best position to maximise opportunities and reduce compliance risks your SMSF Trust Deed needs to be current.
Changes in Circumstances
Another important reason to review your SMSF Trust Deed is to ensure that it reflects the current needs and objectives of the SMSF members. If your circumstances change, you should revisit your SMSF Trust Deed to make sure that it continues to reflect the way you want the SMSF to operate.
How and who can update the Trust Deed
Firstly, contact your SMSF Administrator or Accountant for a copy of your current SMSF Trust Deed. They will also be able to give you some idea about whether it is prescriptive and likely out of date.
Remember though, that they are not lawyers, so they can’t provide you with a list of legal reasons why you should update your SMSF Trust Deed.
If your SMSF Trust Deed needs updating, your SMSF Administrator or Accountant can arrange this.
A best practice update service will give you the choice of having your chain of deeds review. It will also allow you to update important complementary documents such as your death benefit nominations.
At Lifetime SMSF we have partnered with Trusted Legal Solutions to provide a suite of lawyer written and executed documents for your SMSF. If you are concerned that your Trust Deed is not up for the job, contact us for help.