Superannuation Death Benefits: Avoiding disputes

Introduction

As our population ages and we are seeing more and more people working beyond the age of retirement, the monetary amount of one’s superannuation account is naturally increasing.

Along with this increase also comes the issue of disputes arising between family members as to superannuation funds and how decisions are made regarding superannuation monies and its distribution as part of a deceased estate.

Superannuation Nominations

There are generally two types of nominations: binding and non-binding.

Binding Nominations

These involve nominating specific beneficiaries to directly receive benefits upon the death of the fund member. The trustees of the superannuation fund must follow this nomination, unless the nominated person is not able to receive such payment, for example, they are prohibited under the funds rules or by legislation.

Usually, binding nominations will be valid for 3 years from the date of signing, so it is imperative that you ensure your nominations are up to date with your superannuation fund.

Non-Binding Nominations

These involve making a nomination which provides a superannuation fund with the opportunity to consider your wishes and ultimately the fund retains the power to distribute any benefits as it considers appropriate in the circumstances.  For example, a family member might lodge a claim for payment of the death benefit amount.

What if there is no Nomination in place?

If there is no nomination made by the member, then the superannuation fund will make a decision in accordance with legislation and its own fund rules as to how to distribute the benefits payable. The fund may distribute the benefits to:

• a surviving spouse,
• a dependent,
• an interdependent,
• the deceased’s estate, or
• a combination of these persons.

Isn’t Superannuation covered by my Will?

Superannuation is not considered part of a deceased person’s estate, as it is not held by the individual themselves – rather the superannuation fund holds it on trust for the individual. Therefore, it is not automatically captured by the terms of your Will.

There is no requirement for a superannuation fund to distribute any benefit in accordance with the terms of a Will. The fund may consider the terms of the Will in its decision making process, however it is not something it is bound to consider. This makes the Nomination document so critical.

Challenging a decision made by the superannuation fund trustee

Although all super fund trustees must act in good faith and make responsible and reasonable decisions, there have been many cases where decisions regarding estate distributions are disputed.

Some examples of situations where disputes arise include:

• Where the deceased was married and not yet divorced, but had a de facto partner at the time of their passing,
• Where there are competing claims between children as to proportionality,
• Where a beneficiary requires greater provision due to health or financial concerns,
• Where there are blended families (step-children and step-parents),
• In circumstances where the actual form or content of the nomination that was in place is questionable,
• Where the decision making process undertaken by the superannuation fund trustee is questioned by affected persons, and
• In circumstances where there was been no, little or inadequate estate planning undertaken by the deceased.  

If you believe that a superannuation fund has paid a benefit to the wrong person, or that you are entitled to a larger proportion of the benefit, then you are entitled to seek an internal review with the relevant superannuation fund within 28 days of being notified of the trustee’s original decision.

There is generally no fee payable to the superannuation fund for such a review to occur. We recommend that, to put your best case forward, you engage the services of a legal practitioner to advocate on your behalf. We would then provide the trustee with all the relevant information, including a timeline of events (if applicable), declarations as to the nature of your relationship with the deceased, and certified copies of any supporting documentation where relevant.

What if the trustee upholds their original decision?

If you are dissatisfied with the response from the superannuation trustee, you are entitled to apply to the Australian Financial Complaints Authority (‘AFCA’) within 28 days of receiving this response.

AFCA is a free service. It is an independent body that works with parties through dispute resolution processes (such as negotiation and conciliation) in matters regarding financial services and products. AFCA is bound by the governing rules of the relevant superannuation trust and the Australian legislation, therefore, it cannot reach a decision that is contrary to the terms of the superannuation fund itself. There is no need for legal representation when dealing with AFCA, but if you would like a professional advocate to deal with the matter on your behalf, we would be happy to assist.

If the resolution process at AFCA is not to your satisfaction, the decision made by the superannuation trustee can be appealed in the Supreme Court of Victoria.

How to avoid these disputes

The best way to avoid leaving your loved ones with a superannuation dispute is to ensure that you have an effective nomination in place with your fund. These binding nominations are free to complete and can reduce the risk of challenges regarding your superannuation. If you would like some assistance with planning for your superannuation or estate planning generally, we would love to speak with you and provide you with advice and guidance. Please feel free to contact our Wills and Estates team on 1300 205 506 or alternatively fill in the contact form below.

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The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

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