Poorly Drafted Death Benefit Nominations
Superannuation is a trust asset and not an estate asset. Provision for dependents and interdependents are governed by the Superannuation law. In the case of Munro v Munro  QSC 61 the deceased executed a binding death benefit nomination (“BDBN”) in a self-managed superannuation fund (“SMSF”) in favour of the “Trustee of Deceased Estate”. He also executed a Will which made provision for the children of his first marriage. The intention being that his children would benefit. The court held that it was an ineffective nomination under regulation 6.22 of the Superannuation Industry (Supervision) Regulations 1994 (Cth) (“SISR”) and ineffective under s10 of the Superannuation Industry (Supervision) Act 1993 (Cth) (“SISA”). For that reason, the Deceased’s second wife Suzanne Munro was entitled to exercise her discretion to pay the whole of the fund to herself rather than in accordance with the deceased’s testamentary intentions. By doing so she avoided the SMSF assets being accessed by the Court under the TFM legislation. If NEP were introduced in Queensland the case of Munroe may have come to a different outcome.
Superannuation and improper discretion of the fund’s trustee
People often die without having executed binding death benefit nominations. A failure to do so can mean that the trustee of the fund will exercise their discretion in determining to whom the death benefit will be paid. Liaising with a lawyer about your Will could ensure your wishes are carried out after your death.
There is no legislated timeframe for a person to be categorised as living in a de-facto or interdependent relationship by a definition under the SISA. This is starkly different from the position of s15 of the Administration Act 1903 (WA).
In the 2009 Superannuation Complaints Tribunal (“SCT”) determination D09-10\023, the fund trustee resolved to pay a death benefit equally between the deceased’s mother, father, and brother. The complainant alleged that she was in a relationship with the deceased and had cohabited for a period of eleven months. Based on 11 months of co-habitation the Tribunal reversed the decision of the Trustee and paid the money 100% to the deceased’s girlfriend by defining her as living in an interdependent relationship.
In the 1996 SCT determination RM95-96/22, the Trustee resolved to pay 100% of the policy to the deceased’s girlfriend rather than paying the assets into the hands of the legal personal representative. The family alleged that they had only commenced a boyfriend/girlfriend relationship over a period of 6 weeks and could not be defined as an interdependent.
Craig Gregson LLM TEP
(Disclaimer: The material in this article is of a general nature and intended for information only. It is not intended to be comprehensive and does not constitute legal advice. Any person with a specific legal issue should consult a lawyer.)