Hypotheticals by Manny Wood. Published in the Coffs Coast Advocate on 12 March 2016.
When James unexpectedly passes away at the age of 35, his parents, namely John and Jane, dispute the distribution of his superannuation funds.
James had no children and was not in a relationship at the time of his death.
Although the accumulated balance of his superannuation was not large, there was an insurance policy related to his superannuation fund, which resulted in a death benefit payout of $230,000.
James did not leave a will and his estate was therefore to be distributed according to the “rules of intestacy”. In the circumstances, his estate was to be divided between both of his parents equally.
Jane applied for a grant of administration, and with John’s consent, obtained the grant.
However, the only asset of any great value was James’ superannuation, which did not automatically form part of his estate.
Jane makes enquiries with the superannuation fund, which reveal that James did not have a valid “binding death benefit nomination” (BDBN) in place. It was therefore up to the discretion of the trustee of his superannuation fund to decide whether to pay the death benefit to James’ estate and/or his “dependents”, and in what proportions.
Jane says that because James was living with her at the time of his death, paid board and contributed to household expenses, they were in an “interdependency relationship” and that therefore as a “dependent” she should receive the whole of the death benefit herself.
Despite John’s objection, the fund decides to pay the whole of the death benefit to Jane.
John commences action in the Supreme Court and it is ultimately ruled that Jane, as administrator, had a “fiduciary obligation” to act in good faith for John’s benefit, above her own interests, ordered Jane to account to John for half of the death benefit.
This case demonstrates the importance of having a valid BDBN in place, no matter how little you have in super, and a will appointing an appropriate executor to administer your estate.
