Tuesday, July 13, 2021

The Original (Sin)** and super death benefits - the Katz decision

Superannuation entitlements are regularly one of the most significant assets in any estate planning exercise.

Critically however, superannuation benefits need to be regulated in a way that complements a wider estate planning exercise. Arguably, one of the leading cases in relation to superannuation death benefit planning remains, after more than 15 years, the decision in Katz v Grossman [2005] NSWSC 934.

The case involved Katz bringing an action against his sister Grossman (and her husband), claiming an interest in their father’s self managed superannuation fund (SMSF).

A summary of the facts is as follows:
  1. originally, the father and mother were the individual trustees of the SMSF;
  2. the mother died some years before the father, and subsequently Grossman was appointed as a co-trustee with the father (this was to ensure that the SMSF continued to comply with the relevant superannuation legislation);
  3. when the father later died, Grossman appointed her husband as a co-trustee with her;
  4. during his lifetime the father had made a non-binding nomination indicating that he wanted his superannuation entitlements divided equally between Katz and Grossman; and
  5. Grossman and her husband ignored the nomination and paid the entirety of the superannuation entitlements for the benefit to herself.
The Court held that all the trustees of the SMSF had been validly appointed at the relevant times, and that as a result, the challenge by Katz was unsuccessful and Grossman was entitled to keep the superannuation entitlements.

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** for the trainspotters, the title today is riffed from the INXS song ‘Original Sin’. View hear (sic):