By Krishna Skandakumar, Hall & Wilcox Lawyers

Introduction

The question seems simple enough -- what should you do when the trust deed for a self managed superannuation fund (SMSF) is lost? The answer to this question is becoming increasingly important as more and more trust deeds are being misplaced or lost.

This article offers a solution that may be appropriate for some SMSF trustees who lose their trust deed. However, it begins by examining the preliminary question of why a trust deed is even important in the first place.

Does an SMSF require a deed?

Broadly, an SMSF is a type of trust that, like all trusts, is "run" by its trustee. One of the most fundamental responsibilities incumbent on a trustee of a trust is that they obey the terms of that trust. Ordinarily, the trust deed is the document that sets out the rules and terms of that trust (and is also sometimes referred to as the governing rules).

Therefore, without a trust deed, an SMSF trustee cannot say that they are abiding by the terms of the trust, as they cannot know what those rules or terms are. Additionally, other parties who may want to rely on specific powers in the deed (eg, banks) may not be able to.

Find it!

If a trust deed cannot be found, this does not necessarily mean that the trust deed has been lost forever. Accordingly, SMSF trustees should exhaust all avenues to locate it, including:

• contact all accountants, auditors, financial planners and financial institutions who may have seen, or have a copy of, the trust deed;
• contact the deed supplier to determine whether they retained the original trust deed or even an unexecuted copy; and
• check the place where all other financial documents end up (this may be with an advisor or in a safe deposit box or a cupboard/drawer).

But what if it is still lost? Unfortunately, there is little guidance on what seems to be a common problem.

Conclusion

Losing an SMSF trust deed can cause significant problems. Accordingly, an SMSF trustee should make every attempt possible to find the deed.

Ideally, if the trust deed cannot be found, an approach should be made to the court. However, such an approach will involve significant costs and efforts, which many SMSF trustees are unwilling to accept.

A practical solution from Bowmil is for the SMSF trustee to arrange for a carefully drafted deed of variation to be executed with as many beneficiaries as practical added as parties to the deed. This approach is typically the most practical option available, especially where there is a low likelihood of dispute. However, it must be noted that this is not a perfect solution and trustees utilising this solution must be aware that they are assuming some risk.

Note: This is an extract from Retirement & Estate Planning Bulletin, March 2015, Volume 18 No 2