Superannuation is often a person’s most valuable asset. However, many people are unaware that their superannuation death benefit does not ordinarily form part of their estate when they die and therefore, they cannot deal with how it will be distributed in their Will.
When you die, the trustee of your self-managed or industry super fund can pay your superannuation death benefit to one or more of your surviving spouse, children, dependents, interdependents or estate at their discretion.
If you have a self-managed fund and in the case of some industry funds, it is possible to put a ‘binding death benefit nomination’ in place. A binding nomination is a direction to your trustee as to how the benefit should be paid and removes their discretion.
If you cannot put a binding nomination in place, it may be possible for you to prepare a ‘non-binding’ or ‘preferred’ nomination, which informs your trustee of your wishes as to how you would like your benefit to be paid, but is not binding.
If a person has a binding nomination in place to their estate or the trustee of their funds decides to pay the benefit to their estate, it will form part of their estate and be dealt with in accordance with their Will or the rules of intestacy. Otherwise, the benefit does not form part of a deceased person’s estate and their Will cannot dictate how it should be distributed.
It is common for disputes to arise in relation to the validity of binding death benefit nominations.
In order for a binding nomination to be valid, it must comply with the requirements of the fund and nominate an eligible person. For example, if a fund requires a binding nomination to be witnessed by two people and the document is only witnessed by one person, it will not be valid. Similarly, if a deceased person has nominated someone who is not eligible (other than their spouse, child, dependent, interdependent or estate) to receive their superannuation death benefit, it will not be valid.
If a binding nomination is not valid, the trustee is not bound to follow it and is able to pay the benefit to any eligible person and/or any eligible person is able to make an application to the trustee for the death benefit to be paid to them.
Disputes might also arise where an eligible person has been left out of a Will and seeks to have the deceased person’s superannuation paid to them to provide for their maintenance and support.
For example, where a deceased person is survived by children from a first marriage and a second spouse, they may choose to leave all of their assets to their children in their Will and nothing to their second spouse. In that case, the second spouse might make an application to the superannuation fund trustee for the superannuation death benefit paid to them.
Finally, disputes can arise regarding the decision of a trustee where there is no binding nomination in place. For example, a trustee may decide to pay all of a deceased person’s death benefit to a surviving spouse and not make any payment to the deceased person’s children. In that case, the children might dispute the trustee’s decision and seek that all of part of the benefit be paid to them instead.
Once a superannuation death benefit has been paid, it is very difficult to make any application or claim in respect of the moneys. Therefore, if you have concerns in relation to or wish to make a claim against a deceased person’s superannuation, you should seek expert legal advice as soon as possible.
For more information, contact a member of our estate disputes team on +61 7 3001 2999.