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Messy Transactions

June 15, 2017

This week we have been finalising sorting out another super mess, with a trust involved.

$980,000 was transferred from a trust to an SMSF. The controllers were considering characterising the transactions as being a loan to the two members, who then contributed the money to super, one contributing the maximum $540,000 and the other $440,000. They both had binding death benefit nominations in favour of each other.

This would normally be OK, but one member was terminally ill and died shortly after. The effect of was that the $540k in her name went to her husband and her estate was left with no way of repaying the money.

There is no documentation yet, so we have decided to draw up a loan for the whole amount, between the trust and the surviving husband, at a commercial rate of interest and with security, and have him make the $540k advance to his deceased wife a gift.
This means that his wife’s estate will not be bankrupt, and the husband cannot be accused of perpetrating a breach of trust in relation to the money he transferred from the Trust fund.

That should minimise the surviving husband’s liability in relation to both the Trust and the SMSF.

For tidying up messy transactions, see Michael Paterson & Associates.

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