Hypotheticals by Manny Wood. Published in the Coffs Coast Advocate on 18 November 2017.

Chris and Karen are married but estranged.

They are the sole members of a self-managed superannuation fund.

Karen makes a will, appointing her two children as executors. Her will leaves her interest in the superannuation fund to her children and specifically states that she does not wish for Chris to receive a share of her superannuation entitlements.

 

When Karen passes away, her superannuation entitlement amounts to $650,000.

It is discovered that Karen made a binding death benefit nomination in favour of her two children, but that the nomination had lapsed.

The superannuation trust deed states that in the absence of a valid binding nomination, the trustee has the absolute discretion to apply the superannuation entitlements of a deceased person to their spouse or the deceased’s children.

After Karen’s death, Chris establishes a corporate trustee of the superannuation fund and passes a resolution to pay himself the whole of Karen’s entitlements.

Karen’s children commence action against Chris.

The court states that Karen’s will had no bearing on how her superannuation entitlements were to be paid.

The court also states that because the binding nomination had lapsed, it was not relevant.

The court ultimately finds that Chris was able to pay the whole of Karen superannuation to himself, despite the fact that it was clearly against Karen’s wishes.

Karen’s children miss-out on obtaining a share of their mother’s superannuation entitlement and are also ordered to pay Chris’s legal costs.

This case demonstrates the importance of proper estate planning, particularly in circumstances where superannuation is involved.

It is important to understand that a reference in your will to the distribution of superannuation entitlements may not have any legal effect.

It is also important to make a binding death benefit nomination and to understand that in some circumstances, the nomination may cease to be valid after a lapsing period of commonly three years.

If you would like Manny to address a particular legal issue, send your request to manny.wood@ticliblaxland.com.au or call him on (02) 6648 7487.