By Lisa-Marie McKechnie, Partner, and Tanya Hibberd, Graduate
When someone dies without a Will, the person dies ‘intestate’, meaning that the State is assigned the task of determining who will inherit the deceased superannuation fund member’s assets. Each State has its own intestacy laws, the adherence to which may result in the estate being distributed in a manner which would not be consistent with the deceased member’s wishes. The allocation of assets may become a lengthy and distressing process for family and friends and may quickly escalate into a litany of claims against the deceased member’s estate.
When a valid Will exists, it enables an estate to distribute assets of either a financial or sentimental value in accordance with the deceased member’s wishes. Despite the importance of having a Will studies show that on average 45% of Australians do not have a valid and current Will.
A recent determination of the Superannuation Complaints Tribunal (SCT) highlights the importance of ensuring that a current and valid Will is in place. SCT Determination no D17-18\147 considered the Trustee’s decision to pay 100% of the benefit to the de facto spouse of the deceased member of the Trustee’s superannuation fund. Following advice from the deceased member’s mother that the de facto spouse had been “sentenced to a term of imprisonment for dangerous operation of a vehicle causing the member’s death”, the Trustee conducted a further review in 2016 and ultimately affirmed its previous decision.
During her membership of the superannuation fund, the deceased member made two non-binding nominations, the first nomination to her mother (and Legal Personal Representative (LPR)) in 2005 to receive 30% of her account, with her two sisters to each receive 35%. In 2009 the deceased member made a further nomination, allocating equal portions of her account between her mother, father and two sisters. The deceased member died in intestate in 2014 with letters of administration granted to her mother.
The LPR objected to the Trustee’s decision to pay 100% of the deceased member’s benefit to her de facto spouse, alleging that the Trustee had failed to attribute any weight to the deceased member’s nominated beneficiaries, and had also failed to properly reconcile the claims made in relation to the nature and duration of the de facto relationship. Specifically, the LPR claimed that the deceased member had intended to permanently end the relationship and that she was also the victim of domestic violence, claims strongly denied by the de facto spouse.
It is important to note that when the SCT reviews a decision of a Trustee it is not a question of what decision the SCT would have made on the evidence that was before the Trustee, but whether the Trustee’s decision was fair and reasonable. In the event of a member’s death the SCT’s approach is to consider what might have occurred had the member not died, and whether there is anyone who had an expectation of ongoing financial support. As the de facto was the only person, who at the time of the deceased member’s death had an expectation of future financial support from the deceased member, the SCT determined it was open to the Trustee to apportion 100% of the benefit to the de facto spouse.
As the deceased member did not have a Will in place at the time of her death the Trustee and subsequently the SCT were left with only two potential candidates for the benefit, the de facto spouse and the LPR. Regardless of the LPR’s contentions, the Trustee determined that relational conflict does not preclude a person from satisfying the definition of spouse under s 10 SIS Act.
As none of the beneficiaries in either non-binding nomination were dependants of the deceased member, the only way the deceased member could have ensured that her preferred beneficiaries received their allocated percentages of the benefit was to make a 100% binding nomination to her estate (or LPR).
In order for this to be effective, the deceased member would have needed to have a legally binding Will in place, nominating her mother as executrix and allocating via that Will the respective portions of the estate that her mother, father and two sisters would receive. Provided the de facto spouse chose not to challenge the Will’s provisions (under the family provision legislation) then it is possible the mother, father and sisters would have received their respective portions of the benefit from the deceased member’s estate.
This SCT determination should cause you to reflect on the uncertainties and potential issues with dying intestate and a timely reminder that you should not underestimate the importance of ensuring that you have a current and valid Will in place.
To ensure peace of mind that your assets will be distributed in accordance with your wishes, please contact our office to discuss your estate planning needs.
For further information, please do not hesitate to contact:
Lisa-Marie McKechnie | Partner
T: +61 2 8289 5857
Tanya Hibberd | Graduate
T: +61 2 8289 5848