By Caroline Harley -
Snapshot
- When there is uncertainty as to how super death benefits should be paid, dispute resolution or litigation generally follows
- Some people are including directions in their will in relation to the payment of super death benefits as if the will controls the allocation of the death benefit
- Including superannuation considerations as part of estate planning is critical
Death, super benefits and blended families are a perfect recipe for litigation fatigue, the depletion of funds, and increased animosity among the surviving family members. As legal practitioners we should be able to assist clients in avoiding the first two of those issues.
The way it works
When there is uncertainty as to how super death benefits should be paid, dispute resolution or litigation generally follows. With the meteoric rise of self-managed super funds (SMSF), the rules relating to the payment of death benefits can vary significantly to the rules of industry or retail super funds.
When a member of a super fund makes a valid binding death benefit nomination (BDBN), the super fund trustee must pay the benefits to the person/s on that notice, provided they are a dependant under superannuation law. Wait, hold it: how many people who actually completed this form knew there was a legal definition behind the word and didn’t just give the word “dependant” a general usage meaning?
There are other requirements that also need to be satisfied, such as witnessing. Like wills, some super funds require two independent witnesses to sign in order for a BDBN to be valid.
The form of the BDBN is important because the trustee cannot use their discretion to pay super death benefits to anyone else if a valid BDBN is in place at the time of a member’s death. It is the question of validity that opens up the argument that the trustee’s decision was wrong in terms of who got the cash.
