When we talk to the Accountants and Advisers we work with or Prospective Referral Partners we often talk about how our goal for any relationship is to always work towards simple outcomes. Simple means efficient, easy, successful and most of all not complicated or complex. When things do not go to this plan and we are drawn into discussions to unwind a complex situation in an SMSF, often the cause of the situation is insufficient or incorrect documentation. When we look deeper into it, the culprit will often be generic and cheap documentation that was executed by the Trustees on the recommendation of their Accountant or Adviser. This can be a very costly mistake as the generic document has been compiled with little more than the Fund and the Trustee’s names and a date of execution (let’s be honest, sometimes not even this) and no thought has been given to any other aspect of the Fund or Trustees’ circumstances.
Simple outcomes take planning. Simple outcomes take care to establish. Jumping online and finding the cheapest and quickest Trust Deed may seem like a simple process, and maybe it is, but this approach is probably going to create some very costly and complex outcomes down the track.
What is quality when it comes to SMSF Documents?
1. Written and issued by Lawyers
It just makes sense to use a Lawyer to draft and issue any legal documents. When properly engaged, a lawyer has a direct duty of care to your clients and the service is covered by their professional indemnity insurance.
Documents prepared by Lawyers are kept up to date with legislation changes. A lawyer’s duty of care will ensure that their Trust Deed and other documents are written to best keep up with changes in law and audit requirements.
You may not realise that under the terms and conditions of many online document providers, you and your clients are not protected by a lawyer’s professional indemnity insurance. As the Accountant or Adviser, you end up taking all the legal responsibility for the documents. It is important to find out if your client is a properly engaged client of the Lawyer or if you are just purchasing a product prepared by a Lawyer.
2. Considers more than just the SMSF
One size fits all documentation does not consider the unique characteristics of your Fund and most importantly it does not consider how your SMSF documents sit with the legal documentation outside your super fund. For example, a lawyer will make sure that your SMSF documents tie in with your death benefit nominations. A quick online form that churns out a generic document will not do this and may mean that the SMSF death benefit documents may not be recognised. Effective SMSF documents should be suitable to the Trustees’ circumstances and most importantly be legally valid.
3. Comprehensive checklists
Good quality SMSF documents are considered and are achieved through the comprehensive collection of appropriate and accurate information. Collecting the right information for the preparation of legal documents can be confusing and difficult for Trustees so it is essential to make this process as simple as possible. Quality SMSF documents will have detailed checklists written in easily understandable terms for Accountants and Advisers to either prepare on behalf of their clients or work through with their clients. This will ensure that all documents have considered all impact, potential risks, and interactions with other existing legal documents. A comprehensive signing checklist will also help ensure that the documents are executed correctly and become legally valid documents.
Finding the cheapest alternatives may seem like a win for your clients in the short-term, generic SMSF documentation may create unintended negative outcomes for your clients in the long term. To ensure simple and successful outcomes for you clients it is essential that you put good quality legally valid SMSF documents in place for their Self-Managed Super Funds.