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After the death of a client, many advisers provide comprehensive estate planning advice and services to their estate and beneficiaries. Several advisers have asked for clarification around legal issues and IOOF’s procedures when we are notified that a client has died.
The key legal issues involved include:
When we are first notified of the death of a super fund member, we will suspend all negotiated advice fees in relation to the account, including Adviser Service Fees and contribution fees. We will also contact the adviser to inform them advice fees will be suspended.
IOOF will suspend advice fees from the date we are notified of the client’s death. Advisers will need to consider their own processes in relation to advice fees received prior to that point.
We understand that advisers can do a lot of work for beneficiaries after a client passes away – arranging insurance payments, collecting documentation etc. However the law is clear, and we can only deduct advice fees from an account where we are directed by a (living) client.
To reduce the impact on the bereaved family caused by the death of a client, IOOF will be amending the beneficiary nomination forms to allow a nominated beneficiary to approve ongoing advice fees in advance, as part of the estate planning process.
IOOF will only pay advice fees from the date of notification, as this is the date the new client provides us with authority to pay the advice fees from the account. We have no authority to make payments in respect of the period from death to the date of notification.
As a general guide we have set out what, as a minimum, should happen in the following situations. However, in relation to each scenario we suggest you seek guidance from your licensee about the appropriate process to follow upon a client’s death.
1) Providing administration services to the deceased estate or the nominated beneficiaries. This would include assisting with redemptions of investments, facilitating the distribution of lump sum super benefits to nominated beneficiaries and describing the tax consequences of doing so.
2) Where the executor or the nominated beneficiary commences a new financial product on the recommendation of the adviser. This would include, for example, providing advice and facilitating the commencement of a new death pension for a beneficiary, or the executor establishing a new financial product as part of the management of the deceased estate.
3) Where a deceased’s super pension had a nominated reversionary beneficiary and the adviser had originally provided advice to both parties as a couple.
Some commission payments automatically cease on the death of a client. These include:
Otherwise, whether commissions continue will depend on whether the adviser is providing services to the estate and the beneficiaries. As commissions form part of administration fees, the trustee will continue to pay for services if these are being provided by the adviser.
This is the process IOOF uses for charging fees, but other licensees will probably use a slightly different one. You should confirm with your licensee what their process is to ensure any advice fees charged upon the death of your clients are correct.
If you would like more information about how IOOF charges fees after a client passes away, please contact your Client Solutions Manager.
1 This includes any instructions given under a Power of Attorney, even if the Attorney is still alive.