By Noel Davis -
Snapshot
- When preparing a will for a client, it is important to consider the interaction of the bequests made in the will and any superannuation death benefit nominations.
- However, things such as the existence of the benefit, its effect, and who it will be paid to, are sometimes overlooked or inadequately addressed in the drafting of the will or in the instructions given to the trustee of the superannuation fund.
- This article offers some suggestions for better drafting.
A superannuation benefit is often a substantial asset (even in the case of youthful clients), either because of the amount accumulated or because there is a significant insured death benefit in the superannuation fund.
However, in some disputes that arise in relation to deceased estates and the payment of superannuation death benefits, it becomes apparent that the existence of a superannuation benefit was not adequately considered in framing the will and/or the deceased had not given the necessary instructions to the trustee of the superannuation fund as to the disposition of the benefit on death. Put simply, on some occasions, the will says one thing and the instructions to the super trustee say another. That, of course, causes confusion and can give rise to litigation. Take, for example, the Western Australian Court of Appeal decision in Ioppolo v Conti [2015] WASCA 45 in which the direction in the will was not followed because of an inconsistent nomination that had been made to the trustee by the member.
The interrelationship between an estate and a superannuation benefit
Ordinarily, a superannuation benefit does not form part of the estate of a deceased person because it is held by a trustee to be distributed in accordance with the trustee’s discretion or in accordance with binding instructions that may have been given to the trustee by the superannuation member, other than in a will.
That said, in New South Wales, s 63(5) of the Succession Act 2006 states that a family provision order can be made in relation to property that is not part of an estate, if it is designated as notional estate of the deceased. See, for example, Charnook v Handley [2011] NSWSC 1408 and Re Estate Grant, dec’d [2018] NSWSC 1031, where superannuation benefits of the deceased were treated as notional estate for the purposes of making family provision orders that could not be satisfied out of the actual estates.
However, in the absence of a superannuation benefit being treated by a court as notional estate, the benefit is ordinarily payable in accordance with the decision of the trustee, made in accordance with the terms of the trust deed and any valid directions that were given by the deceased member, as discussed below.
Payment of a superannuation death benefit
Most trust deeds governing superannuation funds give the trustee a discretion to pay a superannuation death benefit either to the deceased’s estate or to the deceased’s dependants in the proportions and manner that the trustee determines. Trustees usually favour payment to dependants rather than to the estate. That needs to be borne in mind in framing a will and the interrelationship between the will and the nomination or direction given to the superannuation trustee.
A superannuation ‘dependant’ includes a spouse, de facto spouse, children and a same sex partner, regardless of whether they are financially dependent, as well as a person who was financially dependent on the deceased at the time of death. A person in an interdependency relationship with the member (as defined in s 10A of the Superannuation Industry (Supervision) Act 1993) is also a dependant. Whether or not a couple were living in a de facto relationship or an interdependency relationship at the time of the member’s death is often disputed in complaints about trustees’ decisions on the payment of death benefits.
