Death Benefit Nomination held to be binding on a Self Managed Superannuation Fund Trustee Death Benefit Nomination held to be binding on a Self Managed Superannuation Fund Trustee

Death Benefit Nomination held to be binding on a Self Managed Superannuation Fund Trustee

9 April 2014 | General
In a recent Supreme Court of Victoria decision of Wooster v Morris [2013] VSC594, the court was required to determine the validity of a binding death benefit nomination in respect of a Self Managed Superannuation Fund (SMSF).

The court action was commenced by the deceased’s daughters of an earlier marriage. The deceased and his second wife were members and trustees of a SMSF. Upon the death of the deceased husband in February 2010, his wife (acting in her capacity as the surviving trustee of the SMSF) appointed her son of her first marriage as a joint trustee of the SMSF.

The deceased’s second wife and her son (acting as the joint trustees of the SMSF) preceded to decide that the binding death benefit nomination that the deceased had prepared was not valid. The trustees then resolved to pay the whole of the deceased’s superannuation death benefits to the deceased’s second wife.

The deceased’s binding death benefit nomination in effect gave the whole of his interest in the SMSF (approximately $924,000.00) to his daughters of his earlier marriage.

After the trustees made their decision to pay the whole of the benefit to the deceased’s second wife, the deceased’s daughters challenged the validity of the trustees’ decision and sought orders about whether the death benefit nomination was binding upon the trustees of the SMSF.

The daughters were ultimately successful with their claim against the trustees of the SMSF and also against the deceased’s second wife. The daughters obtained an order from the court for the payment of the superannuation death benefit due to them along with interest and legal costs.

The case is another example of the importance of considering superannuation in the context of estate planning, particularly so in cases involving a blended or estranged family. Whilst the intended recipients received orders for payment of the benefit to them, it took them almost 4 years through the court system to obtain clarity about their entitlement under their late father’s estate. The children will now be required to seek recovery of both the payment of the death benefit made to their step-mother, interest and their legal costs.

The case also highlights the importance of trustees favouring personal interests over and above the interests of the beneficiaries of the fund.

If you would like to discuss how superannuation benefits may impact upon your estate planning, please contact our Wills & Estates specialist, Jarrad Mobbs.

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