By Natashia Blank, Litigation & Dispute Resolution Solicitor at Argon Law
Superannuation in Deceased Estates: What You Need to Know
Superannuation is a significant asset for many Australians, and it is important to understand how it is distributed after a person's death. When it comes to estate planning, it should be noted that superannuation does not automatically form part of a deceased estate. Superannuation funds are held separately and are governed by trustees who determine the disbursement of funds. Unless a deceased made a binding death benefit nomination, the discretion to decide on the recipient of the deceased superannuation generally rests with the trustee of the super fund, although in some cases the trustee's discretion is limited by the superfund trust deed which contains provisions that specify how the death benefit is to be distributed.
How to Find Superannuation of the Deceased
Locating the superannuation of a deceased loved one can be a challenging task. This may seem especially daunting if the deceased had a varied career spanning different industries and professions. However, most industries typically have designated superannuation funds that are commonly used by workers in that field. Keep in mind that there's a possibility the deceased may have used multiple superannuation funds or perhaps had a self-managed super fund.
Depending on your situation, the best place to start is by making enquiries with the deceased’s accountant and/or financial advisor.
If that is not an option, or yields no result, then the next suggestion would be to search the Australian Taxation Office online ‘SuperSeeker’ service. This platform allows you to conduct a search for a deceased person's superannuation at no cost. To use this service, you will need to have the deceased’s tax file number at hand.
Who is Eligible to Claim the Deceased Person’s Superannuation?
Under the relevant legislation the only potential beneficiaries of a deceased person's superannuation are the deceased’s spouse, children and/or other financial dependents and the deceased's legal personal representatives (being the executors or administrators of the deceased's estate).
If the trustee decides to distribute the funds to someone who is not a spouse or dependent child, there may be tax implications for the recipient. For this reason, obtaining tax advice is always strongly advised.
How does the Trustee determine the Recipient of the Superannuation?
A superannuation trustee will often face competing claims to the death benefit from different eligible beneficiaries. In the absence of a binding death benefit nomination, the trustee must give ‘real and genuine consideration’ to a variety of factors when deciding on how to distribute superannuation funds amongst the claimants. Without limitation, these factors may include:
- The relationship between each claimant and the deceased
- Each claimant's financial situation
- The extent of the claimant's dependence on the deceased
- The position of any beneficiaries eligible a claim to the deceased's superannuation
What constitutes ‘real and genuine consideration’ was the key question for the Court to consider in two recent matters, being, Owies v JJE Nominees Pty Ltd [2020] VSC 716 and [2022] VSCA 142 (Owies) and Wareham and Anor ATF the Swanson Superannuation Fund v Marsella [2020] VSCA 92 (Marsella).
Example Case No.1: Owies
The Owies case concerned a dispute regarding the management of an inter vivos family trust. Key issues at the heart of this case included the proper interpretation of the trust deed, the roles and obligations of the trustees, and the entitlements of the beneficiaries in terms of access to information and accountability.
On appeal, the court found that the trustee had repeatedly failed to act impartially and in accordance with the duties imposed by the law, to give real and genuine consideration to interests of two eligible beneficiaries. The court also found that the relationship between the trustee and beneficiaries had deteriorated to an irreparable extent, rendering it detrimental to the beneficiaries' best interests for the trustee to remain in office. As a result, the trustee was removed from their position.
Example Case No.2 : Marsella
In the Marsella case, a daughter and her husband served as trustees for her deceased mother's self-managed super fund. In their role as trustees, they made a decision to allocate the entire death benefit of the mother's fund to the daughter trustee, completely excluding the deceased's husband, who was the stepfather of the daughter.
On appeal, the removal of the trustees was upheld. This decision was based on the fact that the trustees had exercised their discretion without ‘real and genuine consideration’ for the other dependents of the funds, which included the deceased’s husband. Consequently, the trustees' decision was deemed invalid and set aside.
Seek Legal Advice when Claiming Deceased Superannuation
Claiming deceased superannuation can be a complex process to embark upon during a difficult time, but by understanding your eligibility and the duties of trustees, the process can be made much smoother.
If you are thinking of making a claim or you are a trustee that has received a claim, then it is important you obtain professional legal advice at the outset to avoid any unnecessary disputes arising. Get in touch with the Argon Law team if you’re looking to claim superannuation of a deceased person, if you are currently engaged in any kind of estate dispute, or if you have any questions about estates or a trustees duties and obligations.
