It is a frequent misconception that benefits obtained from a superannuation policy, such as a death benefit, can simply be dealt with in the terms of a Will following the death of a member. However, the death benefit of a superannuation policy does not automatically form part of the estate of the deceased person.

A superannuation trust deed (the document which sets up the superannuation fund) usually provides how a member’s death benefit is to be paid following their death. The trust deed will usually allow the member to make a Binding Nomination as to how the benefit is to be paid. There are certain requirements that the nominated person must be a dependant or the member’s legal personal representative. If no such nomination is made by the member than the trustees of the fund have absolute discretion as to how the benefit is to be paid.

A Binding Nomination is different to the nomination of a preferred beneficiary. In most cases, to have a Binding Nomination the member must sign the nomination and have it witnessed by two adult witnesses. Most superannuation trust deeds require the nomination to be renewed every three years.

A recent case determined by the Superannuation Complaints Tribunal demonstrates how matters can be determined different to the wishes of the deceased.

A male member died without leaving a Will. On his death there was an amount payable from his superannuation totalling $131,846.00 which included an insured sum of $120,000.00. At the time of his death he had the following potential beneficiaries:

• A de facto partner whom it was determined was financially dependent;
• A son from the relationship with his de facto who was under 18 years and living with the de facto;
• His former wife to whom he was separated but still remained married;
• An adult daughter from his marriage to his former wife whom it was determined was financially dependent;
• Two sons from his marriage to his former partner whom were not financially dependent.

The deceased member nominated his daughter as his preferred beneficiary.

The Trustee originally determined to pay the benefit 80% to the de facto and 5% to each of the four children.

The daughter of the deceased member objected to the Trustee’s proposed distribution. The daughter proposed that the whole amount be paid to her. After reviewing the matter the Trustee then determined to pay the benefit as follows:

1. 40% to the de facto;

2. 30% to the daughter;

3. 10% each to the three sons.

The matter was then referred to the Tribunal. After hearing the evidence the Tribunal said:

“In this complaint it is clear to the Tribunal that the only persons who had an expectation of ongoing financial support from the Deceased Member had he not died, were

[the daughter] and [the de facto] (and through her, [her son]).

The Tribunal is therefore of the view that the Trustee’s decision to pay any portion of the death benefit to [the sons] when there are competing financial dependent claims from [the daughter] and [the de facto] is unfair and unreasonable in the circumstances.”

Accordingly, the decision of the Tribunal was to pay 50% to the daughter and 50% to the de facto.

Should you wish to discuss the potential to establish a Binding Nomination as part of your estate planning please contact Tonkin Drysdale Partners.

Peninsula Solicitors ..…Criminal Law..…Family Law…..Conveyancing…..Financial Services..…Estate Planning…..Central Coast Legal Services