Tuesday, October 31, 2023

The fine line (& time)** between being entitled … and not

View Legal blog - The fine line (& time)** between being entitled … and not by Matthew Burgess

An often over looked aspect of estate planning related to the payment of death benefits from a superannuation fund.

While with a gift under a will a beneficiary who dies after the willmaker, but before the distribution is made, will still (through their own estate) be entitled, this generally is not the case with superannuation benefits.

Arguably the leading case in this area is Webb v Teeling [2009] FCA 1094.

In summary the factual scenario was as follows -
  1. a member of a super fund had passed away, validly nominating a dependant to receive the death benefit;
  2. the dependant was alive at the time of the member’s death;
  3. the dependant however subsequently died before the death benefit was paid and their legal personal representative (LPR) sort payment to the originally nominated beneficiary's estate.
It was held that the death benefit could not be paid to the LPR of the deceased dependant because they were neither:
  1. a dependant of the deceased member; or
  2. the deceased member’s LPR.
With the aid of hindsight, the workaround in similar situations is to ensure that if the nominated beneficiary dies before the death benefit is paid, the funds should pass (ideally under a binding nomination) to the LPR of the member.

The member's will should then direct the amount specifically to the intended recipients and can do so without restriction as the superannuation rules will have been complied with by the initial payment to the member's LPR.

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** for the trainspotters, ‘Fine Time’ is a song from New Order.

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