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Who Will Get Your Superannuation When You Die? The Devil is in the Detail.

superannuation

Two recent cases have demonstrated that getting your superannuation proceeds into the right hands in the event of your death is not as simple as you might think.  Simply preparing a will may not be enough.  To be certain of the outcome a binding death benefit nomination (BDBN) should be made which requires the trustees of your superfund (whether self-managed or retail) to pay your superannuation death benefit in accordance with your wishes.

The recent Supreme Court of Queensland case of Munro & Anor v Munro & Anor [2015] QSC is a reminder of the critical importance of not just getting your BDBN done, but getting it done right.  

In Munro the member of the superanfund made a BDBN. The beneficiary nominated in the BDBN was the “trustee of deceased estate” instead of “my legal personal representative” as required by the Superannuation Industry (Supervision) Act 1993. This meant the BDBN was invalid, and it was left to the trustees discretion to distribute the death benefit. As a result the intended beneficiaries of the superannuation did not receive their entitlement.

In light of the Munro decision, it is no longer sufficient for superannuation practitioners and superannuation fund members to merely provide generic or imprecise details of the persons or classes of persons to whom a member’s death benefit will pass upon the death of the member.

In another recent case, Ioppolo & Hesford v Conti [2013] WASC 389, the deceased member who wanted her children to receive her superannuation death benefit relied on her will, which appointed her children as executors and left them her death benefit. On the member’s death her children did not receive her death benefit as:

  1. the member’s spouse became trustee of the SMSF due to the terms of the SMSF deed; and
  2. the spouse used their discretion as trustee to pay the death benefit to themselves, not the children.

The fact that the children were the executors and beneficiaries of the member’s will was irrelevant. The children did not receive their mother’s death benefit and it was paid by the trustees to the husband which was contrary to the deceased member’s intentions.

Fox and Thomas provides the following checklist for trustees and members of SMSF to ensure that their benefits pass to their intended beneficiaries:

  • review your SMSF deed to ensure that trusteeship automatically passes to your intended recipient or legal personal representative. Ioppolo & Hesford makes it clear that this does not automatically happen;
  • ensure that your SMSF deed allows for binding death benefit nominations;
  • ensure that your SMSF deed allows for death benefit nominations that do not lapse (some deeds still state that nominations will lapse every 3 years);
  • complete a binding death benefit nomination and ensure that you review it on a regular basis; and
  • seek estate planning advice to ensure that your SMSF deed and estate planning documents do not conflict.

If you would like to review your SMSF deed and estate planning arrangements, please contact Norman Fox or Michael Cowley.