Superannuation is becoming an increasingly important part of estate planning. To ensure that your superannuation is dealt with in accordance with your wishes, and to avoid costly and unintended consequences, it is important to ensure you have validly provided instructions to the Trustee of your Superannuation Fund.

Directing a Super Fund on how they are to pay your superannuation benefit after your death is usually achieved by providing a written ‘Binding Death Benefit Nomination (‘Nomination’) to the Trustee of your Super Fund nominating to whom the balance of your superannuation is to be paid.

Typically, Super Funds allow for a Nomination to be lapsing or non-lapsing. A lapsing nomination lapses after a specified period of time, usually 3 years, after which a new Nomination must be made. Some Super Funds do not allow non-lapsing nominations, in which case you need to redo your Nomination every couple of years. The class of persons you can nominate is restricted by Superannuation Law and often also by the rules of the fund concerned. Typically, these include close family members or dependents.

What happens if no Nomination is made?

If you do not make a binding Nomination, or it lapses or is non-binding, the Trustee of your Super Fund will be bound by the rules of the Fund when dealing with your funds after you have died. In these circumstances, the Superannuation Trustee will usually have discretion as to whom the fund can be paid, but may be limited by the rules of the Fund to only consider certain people or classes of people.

This may result in your Super being paid to somebody else rather than your intended beneficiary. Further, it may cause headaches for the executor of your estate if that person is somebody who is eligible to claim your Superannuation personally (for example, your spouse). This is because an executor of an estate is under a legal obligation as a fiduciary to act in the best interests of the estate. This means that, unless the other beneficiaries of the estate provide informed consent or the executor is the sole beneficiary of the estate, the executor will be obliged to put the interests of the estate above their own personal interests and to, therefore, apply to the Superannuation Trustee to pay the funds to the estate rather than to themselves.

This problem is illustrated in the Supreme Court of South Australia decision Brine v Carter [2015] SASC 205 in which the deceased appointed his de facto partner, and his three children from a previous relationship, as the executors of his estate. The deceased made a non-binding nomination to his superannuation Trustee to pay the superannuation to his estate. However, the Trustee paid the superannuation to the deceased’s de-facto partner personally. The children were successful in arguing that the de-facto breached her fiduciary duty by applying for the funds to be paid to her, but she was not legally bound to pay the money to the estate.

In the Supreme Court of Queensland decision Munro v Munro [2015] QSC 61, the deceased’s nomination to pay “Trustee of Deceased Estate”, presumably with the intention that the funds be paid to his estate, was found to be invalid due to the legal distinction between the role of executor and trustee of an estate. As a result, the Trustees of the deceased’s Self-Managed Superannuation Fund (‘SMSF’), being the deceased’s partner and the partner’s daughter, were not bound by the deceased’s nomination, at the expense of the deceased’s children from a previous relationship.

Cases such as these demonstrate the importance of receiving legal advice when drafting your estate planning documents, especially in complicated family circumstances. If you have any queries about your superannuation or estate planning, do not hesitate to contact us to discuss.

Daniel is a solicitor in our team with experience in litigation, conveyancing & property and wills & estates.

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No part of these notes can be regarded as legal advice. Although all care has been taken in preparing all notes, readers must not alter their position or refrain from doing so in reliance on any of these notes. Stephen Wawn & Associates do not accept or undertake any duty of care to readers relating to any of these notes. All inquiries should be directed to Stephen Wawn & Associates.

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