“It's pretty simple, isn’t it?”
Claiming superannuation death benefits,
and avoiding situations of conflict, when a person dies.
|A ‘superannuation death benefit’ is the payment of a person’s superannuation entitlement (which may or may not include life insurance proceeds) on their death. We have previously discussed (in Issue 22 of Worrall Moss Martin News) the importance of understanding the difference between:
Superannuation death benefits are just one example of an asset that is commonly ‘non-Willable’, unless a person takes certain steps to ensure that they fall into their estate (for example by completing a binding death benefit nomination).
- ‘Willable assets’ (assets that form part of a person’s estate, and are able to be gifted by their Will); and
- ‘non-Willable assets’ (assets that do not form part of a person’s estate, and are not able to be gifted by their Will).
Without proper estate planning, and consideration, superannuation death benefits can be paid by the trustee of the superannuation fund to:
In the absence of binding nominations that remain valid at the time of death, the trustee has a full discretion over the payment of superannuation death benefits. This means the payment may be made in a way that does not reflect the deceased person’s intentions or wishes, and often gives rise to disputes.
- the deceased person’s estate; or
- a ‘superannuation dependant’, who include a spouse of the deceased person, any child of the deceased person, and any person with whom the deceased person had an interdependency relationship at the time of their death.
In Burgess v Burgess  WASC 2018, the Supreme Court of Western Australia was required to make a decision about the proper payment of superannuation death benefits where a surviving dependent spouse claimed her husband’s superannuation death benefits for herself, where she was also appointed as the Administrator of his estate.
The Facts: Mr Burgess died in May 2015 without leaving a Will. He was survived by his wife and two minor children. Under the intestacy laws in Western Australia (which are different to those in Tasmania), Mr Burgess’ estate was to be divided between his spouse and his children.
Among his assets were superannuation death benefits with four large superannuation funds. There were no binding death nominations in place in relation to any of the funds.
Mrs Burgess made an application for Letters of Administration, and was appointed as the Administrator of Mr Burgess’ estate by the Supreme Court of Western Australia on 27 June 2016.
Prior to being appointed as Administrator, Mrs Burgess made an application to each of the superannuation funds to receive Mr Burgess’ superannuation death benefits in her personal capacity.
If the all of the superannuation funds paid the superannuation death benefits to her, Mrs Burgess would have obtained a greater benefit than the intestacy laws provided for.
After making the applications:
The Law: It is well-established that a Legal Personal Representative (that is, an Administrator or Executor) is bound by fiduciary duties of trust, loyalty and fidelity. As a consequence, the Legal Personal Representative (subject to limited exceptions):
- one fund paid Mr Burgess’ superannuation death benefits to Mrs Burgess personally on 23 February 2016 (prior to her being appointed as Administrator);
- the second paid Mr Burgess’ superannuation death benefits to Mrs Burgess personally on 30 December 2016 (approximately six months after she was appointed as Administrator);
- the third fund paid Mr Burgess’ superannuation death benefits to his estate on 26 October 2016; and
- the fourth fund had not yet, at the time the Court issued its ruling, made a decision about the payment of Mr Burgess’ superannuation death benefits.
- must administer the estate for the benefit of the beneficiaries. One component of this is a duty to maximise the estate available for distribution between the beneficiaries;
- must not obtain a benefit from their role as Legal Personal Representative; and
The Decision: The Court held that once Mrs Burgess was appointed as Administrator, any claim made by her to receive Mr Burgess’ superannuation death benefits in her personal capacity gave rise to a conflict of interest with her duties as Administrator, and Mrs Burgess was required to account for those monies to the estate.
- must not place themselves in a position of conflict (that is, where the Legal Personal Representative’s personal interests conflict with the interests of the estate).
This is because compliance with Mrs Burgess’ fiduciary duties as Administrator required her to not only disclose the estate as a potential claimant of Mr Burgess’ superannuation death benefits, but to make an application as Administrator to receive Mr Burgess’ superannuation death benefits on behalf of the estate (to then be distributed in accordance with the laws of intestacy), which could then be considered as part of each fund’s trustee exercising its discretion. By making an application for payment of the superannuation death benefits to her personally, she was favouring her own personal interests over the interests of the estate.
In practical terms:
The Court observed that these were unfortunate circumstances that could have been avoided had Mr Burgess, prior to his death, done two things differently:
- Mrs Burgess could retain the benefits received from the first superannuation fund. This was because she was not an Administrator at the time of making the application for the superannuation death benefits, and therefore no conflict arose;
- Mrs Burgess had to account to the estate for the superannuation death benefits applied for, and received, by her in her personal capacity after she was appointed as Administrator of Mr Burgess’ estate; and
- Mrs Burgess’ duties as Administrator required that she claim the remaining superannuation death benefits, which had not yet been paid, on behalf of the estate.
Key Points: This case highlights the importance of:
- first, if Mr Burgess had executed a valid Will, “then the undesirable scenario for his surviving family of dealing with an intestacy situation would have been avoided”. That Will could have explicitly authorised Mrs Burgess, if she was appointed as an Executor, to act exclusively in her own interests by applying to personally receive Mr Burgess’ superannuation death benefits; and
- second, if Mr Burgess had completed a valid binding death benefit nomination nominating Mrs Burgess to receive the full benefit of his superannuation death benefits and provided this to the trustee of each superannuation fund, then the trustee would be bound by that instruction, and no conflict would arise with Mrs Burgess’ duty as Administrator upon receiving the superannuation death benefits in her personal capacity.
How Can We Help? Worrall Moss Martin Lawyers has specialist skills and experience in estate planning, estate administration and estate litigation, and can help you with any enquiries.
- preparing a comprehensive estate plan, including:
- a Will that details any preferences about the payment of superannuation death benefits (including any insurances held through superannuation funds);
- a binding death benefit nomination providing directions about the payment of superannuation death benefits; and
- ensuring that your estate plan, including your Will and any binding death benefit nominations (with some funds, these may lapse after a particular period of time), remain up to date;
- properly considering, and choosing the “right” people to appoint as Executors; and
- seeking advice following death at the earliest opportunity (including about whether you should accept your appointment as Executor, or apply to be appointed as Administrator if there is no Will).
Please contact our estate planning lawyers, Kimberley Martin, Casey Goodman or Ashleigh Furminger, if you would like advice about preparing a comprehensive estate plan that makes appropriate provision for superannuation death benefits.
If you are considering claiming superannuation death benefits and/or have been appointed as an executor, or are a potential administrator, of an estate and would like advice, please contact our estate administration and dispute lawyers, Kate Moss, Robert Meredith, Megan Bird or Eve Hickey.
A wealth of information in relation to estate and commercial matters can be found at our website www.pwl.com.au
Contributions and suggestions from Worrall Moss Martin News readers are always appreciated. Email us at firstname.lastname@example.org
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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