Succession Law Update – Superannuation and your Estate


Did you know that Australians have $1.8 TRILLION dollars invested in superannuation products?i

Yet, when we meet with clients to discuss their estate planning requirements, many fail to realise their superannuation is an “asset”, and only consider the value of their superannuation benefits when prompted to do so.

According to the Australian Bureau of Statistics (ABS) sourced data released by Association of Superannuation Funds of Australia (ASFA) in its March 2014 reportii, the average superannuation account balance at retirement for females is around $105,000. By contrast, the average male will retire with almost double this amount, with an account balance of $197,000.

These average balances do not take into account the value of any life insurance/death benefit which may also form part of the superannuation payment, which is often more than the balance of the superannuation account itself.

Superannuation monies payable upon your death may not necessarily form part of your deceased estate, and therefore may not be distributed in accordance of the terms of your will.

It is essential that you take steps to ensure that any death benefit payable by your superannuation fund is paid to the right beneficiary. Your superannuation fund may require a binding death nomination to be completed, in order to abide by your directions concerning the payment of that death benefit.

The importance of having a will and binding death nomination in place was recently highlighted in the Queensland decision of McIntosh v McIntosh [2014] QSC 99.

In this case, the deceased (James) died intestate (i.e. no will) and had not completed a binding death nomination. James died without a spouse or surviving children, but was survived by both parents, who had divorced many years earlier, and who had equal rights to be appointed as administrators of his estate and to the estate itself. James lived with his mother at the time of his death, and had done so for most of his life.

The net value of James’ estate was approximately $80,000.00. However, his superannuation entitlements were significant, worth over $450,000.00.

His parents were both entitled to make a claim on their son’s superannuation entitlements in their individual capacity, in competition with the estate’s right to claim on the superannuation.

James’ mother, Elizabeth, applied to act as administrator, and was duly appointed. In an affidavit supporting her application to be appointed as administrator, she acknowledged her responsibility to collect James’ assets and distribute evenly between herself and James’ father, John.

She then applied to the various superannuation funds to have James’ death benefits paid to her personally, which the super funds agreed to based on an “interdependent relationship” which existed between mother and son.

The effect of this, was that John would only receive half of the estate (excluding super), worth around $40,000.00.

The question before the court was essentially whether Elizabeth, having received the super in her personal capacity, had a duty to transfer it to the estate?

John’s solicitors successively argued that Elizabeth, acting as the administrator and personal representative of the estate, had breached the fiduciary duty to maximise the return for the estate. The court held that Elizabeth was “in a situation of conflict, which she resolved in favour of her own interests”.

Elizabeth was required to pay the super benefits to the estate, to then be evenly distributed between herself and James’ father, John.

How could all this have been avoided?

There are two simple steps:-

1. James could have made a will appointing his mother as executor, and given specific instructions regarding the distribution of his estate. There is a strong indication that the outcome would have been different, as the appointment of an executor is a deliberate act by the will maker, with knowledge that the executor’s duties may conflict with their personal interests, and some exceptions to the fiduciary duty may have been applicable; and

2. James could have executed a binding death nomination to each of his superfunds, nominating his mother as sole beneficiary. Had this occurred, it is almost certain that the case would not have arisen.

The importance of estate planning cannot be understated. Please contact one of our estate planning team should you require any assistance with your estate planning requirements.

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