I was recently involved in a dispute regarding the payment of a Deceased member’s death benefit from a superannuation fund. It highlighted to me the importance of considering your Superannuation when undertaking your Estate Planning, and the consequences of not properly considering your Superannuation.
In this matter:
- The Deceased had a substantial amount of money in superannuation;
- The Deceased had advised her children prior to her death that they were to share equally in her Estate (which she said included her superannuation) with her de facto;
- The children and the de facto did not get on;
- After the Deceased passed away it was established that assets had been transferred to the de facto prior to the Deceased’s death and other assets were held jointly with the de facto (meaning that they went automatically to the de facto);
- The de facto made an application to the Trustee of the Superannuation Fund for 100% of the death benefits to be paid to the de facto;
- There was very little left in the Estate assets to be distributed, as the Superannuation did not form part of the Estate assets;
- The children also applied to the Trustee of the Superannuation Fund, for the Trustee to exercise his discretion to pay the superannuation fund consistent with the wishes outlined in the Deceased’s Will;
- The Trustee of the Superannuation Fund determined that it would pay all money to the de facto.
In this case there was no Binding Death Benefit nomination signed.
What is a Binding Death Benefit Nomination?
A Binding Death Benefit Nomination is a document signed by a member of a Superannuation Fund binding the Trustee of the Superannuation Fund to pay amounts from the Member’s entitlements in the Superannuation Fund to those parties nominated.
Formal Requirements of a valid Binding Death Benefit Nomination
To be valid a Binding Death Benefit Nomination must satisfy all of the following:
- It must be in writing;
- The people nominated must be dependants or a legal personal representative of the member, at the time of the member’s death. Dependants can include inter-dependants (e.g. two persons living together and providing financial, domestic and personal support to each other;
- It must state the proportion of the benefit payable to each nominated beneficiary;
- It must be signed and dated by the Member in the presence of two witnesses over the age of 18 years, neither of whom are nominated to receive a benefit;
- The witnesses must sign and date the declaration stating the Member signed the document in their presence;
- It must have been signed, confirmed or updated within a three year period (or shorter period if specified in the Trust Deed).
The formal requirements of the Superannuation Industry (Supervision) Regulations must also be complied with.
What if there is no Binding Death Benefit Nomination?
If there is no Binding Death Benefit Nomination the Trustee of the Superannuation Fund has a discretion with respect to who should get paid.
Regulation 6.2.2 of the Superannuation Industry (Supervision) Regulations 1994 provide that a Trustee of the Superannuation Fund must pay a death benefit to either or both of:
- The Member’s legal personal representative (i.e. the Estate); or
- One or more of the Member’s dependants.
Dependants can include a spouse (including a de facto spouse), child or a person in an inter-dependency relationship.
In this particular situation, if a Binding Death Benefit Nomination had been signed, the death benefits from the Superannuation Fund would have been paid directly to the children in the desired proportions, and no dispute would have arisen. It is disappointing when the wishes of a Deceased person are not seen to fruition, due to an oversight or misunderstanding of what is required to fulfil your objectives within your Estate Plan.
To avoid this situation occurring in your family, it is important to obtain expert legal advice when preparing your Estate Plan, Wills and other associated documents. Please do not hesitate to contact me should you have any questions in relation to this issue.