Superannuation Death Benefits
With many people holding a sizeable part of their retirement savings (and investments) in Superannuation, and given the increasing number of cases in the courts where Superannuation Death Benefits are in dispute, I thought it would be best to devote Part IV to this ever growing area of practice. What may seem very simple, simply isn’t that simple given the variety of factors that come into play. All you need is someone sufficiently motivated to put everything to the test.
Every family situation is different. Every Super Fund is different. And, there is not, as some may have you believe, a ‘one size fits all’ strategy. There are as many strategies for just as many varying scenarios and no one issue is complex (but putting it all together can be).
And if you think that your Will covers your Super think again. Absent a properly made Binding Nomination, the payment of Death Benefits from a Super Fund is almost always in the discretion of the Trustee of the Fund (so it does not matter what your Will says).
Here are some questions you should ask yourself (and provide the answers to your advisor):-
- Do you want flexibility or do you want to lock things down forever?
- Do you have an SMSF or are you a member of a Retail/Industry or Public Sector Fund?
- Does your Fund Trust Deed provide that the payment of a Death Benefit is in the absolute discretion of the Trustee? (don’t be surprised here – most do);
- Will your spouse/former spouse/defacto spouse/children/step children/children of your defacto spouse be happy or unhappy with what you have done (or haven’t done)?
- How does this fit in with the Will you prepared 10 years ago when your account balance was not as big as it is now?
- Is there potential for a claim to be made that the person making the decision about a Death Benefit has a conflict of interest (i.e. they are also the executor of your estate and bound to pay it to the estate)?
- What does your last Death Benefit Nomination say? Is it consistent with your Will? Is it consistent with the pension your accountant got you to set up? Are the nominated beneficiaries legally able to be paid a Death Benefit?
- What is the tax treatment of whatever it is you have done (or not done)?
The reassuring thing is that most people lead such uncomplicated lives that by and large none of this will ever concern them or affect their loved ones greatly. In saying this, the seeds of most bitterly fought Superannuation disputes are sowed years before during the development of a blended family (commonly the biological children of the deceased at war with the most recent spouse of the deceased).
There are also often disputes about whether or not someone is a spouse or not.
There is layer upon layer of regulation (and recent superior court decisions about the conflicts facing estate executors who are also Superannuation Fund Trustees) to make it a lawyer’s paradise. I think you will agree that this is a fantastically ripe environment for litigation/mediation/court hearing processes (not to mention angst, stress and all of their companions) to be generated.
Not the best experience for your loved ones and something that can in the majority of cases be avoided.