WMM Law News

Issue 36,  August 2021

I Wanted My Mother to Receive My Superannuation Death Benefits?
What Do You Mean My Nomination is Not Valid?

“Testamentary freedom”, the freedom to decide who receives your assets when you die, is a fundamental tenet of estate planning, but many people may not realise that certain laws restrict that freedom.   One law we have previously discussed at length is the Testator’s Family Maintenance Act 1912 (Tas), but another – and suddenly controversial – law is the Superannuation Industry (Supervision) Act 1993 (Cth) (“the SIS Act”).

When a person dies, often one of the most substantial assets to administer is that person’s entitlement to benefits through their superannuation membership/s, which may include a component of life insurance.   Deciding who you want to receive these assets after your death is most commonly done by way of a “binding death benefit nomination”.   Without a binding death benefit nomination, the trustee of your superannuation fund decides who receives your superannuation.

Who can you choose to nominate when completing a binding death benefit nomination?   At the end of the day, it is your choice… isn’t it?   Although this process may seem simple, unfortunately this may not always be the case.  Disputes concerning payment of superannuation death benefits are extremely common.   For example, in Issue 29 of WMM News we discussed the conflicting positions of beneficiaries claiming superannuation death benefits.

Recently, the payment of a deceased’s superannuation death benefits to a “controversial” beneficiary has been making headlines across the country.   After Ashleigh Petrie, a 23-year-old court clerk, died in 2019, her superannuation death benefits were paid to her fiancé, Magistrate Rodney Higgins.   This payment has been the subject of public outrage for a variety of reasons, as Ashleigh is reported to have completed a binding death benefit nomination gifting her superannuation to her mother.

The Background:   As reported by various media outlets, in early October 2019, Ashleigh and Magistrate Higgins created waves throughout the legal profession when it was revealed that the Magistrate and his young court clerk were in a relationship.   The couple were together for seven months, and eventually became engaged in September 2019 after a romantic trip to Fiji.   The relationship raised questions about the internal culture of the judicial system and the power imbalance between judges and their associates.   Here, Ashleigh’s fiancé was not only 45 years her senior, but was also her boss.

Sadly, Ashleigh died in October 2019.   Within days of her death, Magistrate Higgins called Ashleigh’s superannuation fund to enquire about claiming Ashleigh’s $180,000.00 death benefit.  

The Controversy:   Despite Ashleigh’s binding death benefit nomination directing her death benefits to her mother, and the fact that Magistrate Higgins earned an average annual income of $324,000.00, it is reported that Rest Super agreed to pay him Ashleigh’s death benefits.

Ashleigh’s mother is reported to have said that Magistrate Higgins refused to provide a share of those superannuation death benefits to her, as ‘payback’ because she refused to provide him with a portion of Ashleigh’s ashes.

Magistrate Higgins has not spoken publicly about the matter.

The Law:   So why did the trustee disregard Ashleigh’s binding death benefit nomination?

Under the SIS Act, the trustee of a superannuation fund is only allowed to pay superannuation death benefits to a deceased person’s “dependant”, or to a person’s estate.   Dependants as defined in the SIS Act include a person’s spouse (or de facto partner), children, and any person with whom the person has an “interdependency” relationship.

This means that a binding death benefit nomination directing payment to a person other than a dependant is invalid.   If a binding death benefit nomination is invalid, the trustee decides whether it will pay the superannuation death benefits to their estate, or to the person’s dependant/s.

Parents are usually not considered to be in an interdependency relationship with their adult children.   The SIS Act outlines the factors relevant in determining whether two people (whether or not related by family) have an interdependency relationship, including whether they live together, have a close personal relationship, and one or each of them provide the other with financial and domestic support and personal care assistance.   The existence of shared property ownership, the length of a relationship, and whether there are children to be cared for and supported are also relevant considerations.

Although its decision-making process on this matter has not been publicised, it is likely that the trustee of the superannuation fund determined that Ashleigh and her mother were not in an interdependency relationship, and consequently her binding death benefit nomination was invalid.

Magistrate Higgins claimed the superannuation death benefits as Ashleigh’s “spouse”.   Again it is reported that the trustee agreed, and paid him Ashleigh’s superannuation death benefits outside her willable estate.   Given the binding death benefit nomination Ashleigh had completed, one might well think that this decision undermined Ashleigh’s intentions about the distribution of her assets on her death.

Ashleigh’s mother has lodged a complaint about the trustee’s decision with the Australian Financial Complaints Authority (“AFCA”).   She claims that Magistrate Higgins was not Ashleigh’s “spouse”.   AFCA is yet to finalise the complaint.

The Outrage:   There has been considerable public comment suggesting that the trustee’s decision was ‘unjust’, and that her death benefits should have been paid out in accordance with her wishes.   The nature of her relationship with Magistrate Higgins, his significant independent means, and the bitter conflict between him and Ashleigh’s family, led to more than 15,000 people signing a public petition demanding that the trustee pay the death benefits to Ashleigh’s mother.

Most funds provide general guidance about who can be lawfully nominated in a binding death benefit nomination.  However funds do not notify their members if they have made an invalid nomination.  

Ashleigh’s case has highlighted some of the difficulties in superannuation laws.   Since the publication of the trustee’s decision there have been calls to reform the law to better protect members’ interests and freedom to decide who will be their superannuation beneficiaries.

What can you do?   Fortunately, there are estate planning mechanisms available to ensure that your superannuation death benefits are paid to your chosen beneficiaries, even if they are not your “dependants” under the SIS Act.   This means that, with proper planning, you can ultimately direct your superannuation death benefits to your mother (or father, or siblings) if that is what you wish.

How can we help?   WMM Law has specialist skills and experience in estate planning, and can help you with any enquiries.   Please contact our lawyers, Kimberley MartinCasey Goodman or Ashleigh Furminger, if you, or your client, need expert advice and guidance about preparing a comprehensive estate plan that documents and details wishes about the payment of superannuation death benefits after death, including ensuring that your nomination is valid, and a strategy is in place to ensure that it can be renewed if and when it lapses.
The Beginner’s Guide to Strata Title
If you own a unit, townhouse or an apartment, it is likely that the property forms part of a “strata title”, and is governed by a “body corporate”.

It is easy to picture a body corporate as the annoying body corporate manager, who knocks on your door occasionally to tell you to turn your music down.   But the legal concept of a body corporate is far more complex, and includes unique “rules” that apply only to the properties that form part of the strata title.

Understanding the “rules”, and what they require, is important for those who intend to live in a strata title property.   Ignorance may result in their beloved pet being unable to reside at the property (many strata schemes do not allow pets).   For those who intend to invest in a strata property, and not live there, a “set and forget” mindset may result in significant additional costs.   

What is a strata scheme?   A strata scheme is a type of land development which divides a larger parcel of land into “lots” under the same plan, and provides for how these lots are to be managed by a legal entity (the body corporate).

Under a strata scheme, not only do individual owners own their own individual lot, but they also have a shared ownership over common areas with other lot owners.   This may include shared gardens, external walls, roofs, driveways and stairwells.   The shared areas are managed by the body corporate.

The degree to which each owner has voting rights in the body corporate decisions, must make body corporate contributions, and shares responsibility for the common areas, is determined by that owner’s “unit entitlement”.   Some strata schemes have special “unit entitlements”, to account for different forms of ownership of common property.   For example, in some multi-storey apartment complexes, some lot owners may benefit from lift facilities and others may not.   The special unit entitlements would take into account that only some owners would be required to maintain the lifts (and their contributions would be calculated and apportioned accordingly).

Strata schemes can operate in residential complexes (units, townhouses, serviced apartments and retirement villages) as well as in commercial settings, such as retail shops or office spaces.

What is strata title?   The strata title is the document registered with the Land Titles Office which outlines the ownership of the property and shared areas.   It is important to obtain a copy of the strata title and plan to understand what you own and what is common property.

The strata title documents also set out the rights and responsibilities of all parties, and each lot owner’s set unit entitlement.

What is a body corporate and what is it responsible for?   The body corporate controls the management and day to day operation of the strata scheme.   The body corporate holds the legal responsibility for the management and maintenance of the shared common areas.   If there is no separately appointed strata manager, the owners may therefore have additional responsibilities associated with the running of the body corporate.

A body corporate is responsible for things including:
  • maintaining, managing and improving common areas of the property on behalf of lot owners;
  • making and enforcing its own rules, called “by-laws,” which owners and tenants are required to abide by; and
  • taking out insurances on behalf of owners, such as building insurance.
The body corporate is also responsible for calling meetings of owners to make decisions about running the strata scheme.   At least one meeting – the Annual General Meeting (AGM) – must be held every year.

Owners are not required to attend the AGM, but given that decisions made will affect lot owners, it is recommended that an owner is aware of all decisions made.   Owners may attend either in person or by nominating someone else to attend in their place.

What by-laws apply?   A strata scheme must have a set of by-laws.   By-laws cover a wide range of issues such as improvements to property, the keeping of pets, noise restrictions and parking.

Many strata schemes make use of the standard “Model By-Laws” implemented by legislation.

It is important to be aware of the specific by-laws that apply to the strata scheme.   Penalties can be imposed by the body corporate, depending on the terms of the by-laws and the nature of a contravention.

For example, the provisions of many by-laws (including the Model By-Laws) do not permit pets to be kept on the property without the consent of the body corporate.   In our experience, many owners and tenants are not aware of these rules, leading to body corporate disputes.

As an owner what am I responsible for?   As an owner, you have different responsibilities to the body corporate, including:
  • ensuring you comply with the by-laws; and
  • paying the required fees (contributions).
Who is responsible for insurances?   One of the key roles of the body corporate is to insure all buildings and other improvements on the property site against any unforeseen events, to provide cover for damage to the building, as well as public risk insurance over the site, to insure for circumstances where people may be injured on common areas.

Not all body corporates adequately maintain insurance, and there can be severe consequences for not doing so.   It is important for owners to be vigilant in ensuring that insurance cover is current and appropriate.

Individual owners are responsible for taking out and maintaining their own contents insurance for their lot, and any other applicable insurance cover that the body corporate does not have in place.

How are body corporate fees determined?   Owners are required to pay fees to the body corporate, which go toward the maintenance and repair of common areas.   Fees are determined at meetings of the body corporate, and are generally apportioned between the owners based on their ownership of their property and shared areas.

Does a body corporate have to be active?   A body corporate is required to be active at law, and there are penalties for a failure to have an active body corporate.   However, in some instances a body corporate may no longer be functioning (or may never have been).   This is largely due to the nature of how the body corporate is run, as often it will rely on owners to actively manage it themselves.   In the case of new strata developments, the original owner may have neglected to properly establish the body corporate before selling the lots.

Failure to maintain an active body corporate places the lot owners at significant risk.

Some indications that a body corporate is active include:
  • signs that the body corporate is doing things to maintain shared areas;
  • owners receive notices of meetings or payment of fees; and
  • owners receive documents (during the purchase of the property or thereafter) which may contain information indicating that the body corporate is functioning.   For example, notices of insurances.
Sometimes, as strata schemes are so comprehensive, a strata manager may be engaged to ensure it is run smoothly.   Strata managers are involved in the administration of the scheme by taking on some or all of the body corporate’s responsibilities, on a delegated basis.

Can I rent out my property?   Lot owners can rent out their property, subject to any restrictions in the by-laws.

It is becoming increasingly common for by-laws to prohibit short term leases (leases that are for less than 6 months).   Certain types of strata schemes may also impose eligibility requirements on prospective tenants.

It is important to carefully review the by-laws to determine how you can and cannot deal with the property.   If the by-laws are uncertain, or vague, it is important to seek proper advice before taking any steps that could subject you to penalties.

How Can We Help?   WMM Law has specialist skills and experience to assist with the complex strata issues.   Our commercial and property team led by David Bailey can provide you with comprehensive advice and assistance if you are, or your client is, considering buying a strata property including investigating whether a strata scheme applies and ensuring you are not buying into a scheme with significant fees or with unnecessarily strict by-laws.
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This newsletter contains material for general educational purposes and is not designed to be advice to any particular person about their own affairs as it does not take into account the circumstances of the reader as an individual.  It is recommended that appropriate professional advice be obtained by each reader so that reliance can be taken upon that advice.

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