Peter and Mary have established a self-managed superannuation fund. The fund consists of a commercial property and a substantial amount of cash held in fixed term deposits. They are both members of the fund and directors of the corporate trustee.
When Peter dies, Mary exercises her discretion as Joseph’s executor and director of the trustee of the fund to pay herself a portion of Peter’s member balance as a lump sum and elects to receive the rest in the form of a reversionary pension.
These arrangements are put in place within a few months of Peter’s death and do not cause any problems.
Problems arise however, upon Mary’s death.
Peter and Mary had a son and a daughter, namely Joseph and Joy. Their children are both in their 50s and do not get on very well with each other. Their daughter is a successful accountant and their son is a well-known mechanic.
Mary’s will appoints Joy as her executor and states for the balance of the superannuation fund together with the rest of her estate to be distributed equally between her children.
Unfortunately, Mary neglected to execute a binding death benefit nomination in relation to her superfund.
Joy is aware that the wishes contained in Mary’s will regarding the superannuation fund are not binding and that without a binding death benefit nomination, she is able to exercise her discretion as executor and substitute director of the corporate trustee to pay the whole of the superannuation fund to herself. This is what she does and Joseph therefore stands to receive almost $1 million less than Joy.
Because the superannuation fund is self-managed, Joseph has no right to have the matter referred to the Superannuation Complaints Tribunal.
Joseph is single, owns an unencumbered home and earns a reasonable income. He consults a solicitor, who advised him that orders designating the balance of the superfund as “notional estate” would be required and his inability to demonstrate “need” means that an application to seek further provision from his mother’s estate would be “risky” and could be costly. He does not proceed further.
Your individual circumstances may differ and accordingly, this column cannot be relied upon as legal advice.
