Estate planning is often considered to be “just a Will”, but it actually comprises a lot more than just that one document. One aspect of a comprehensive estate plan that is often misunderstood is that of superannuation.
With so many individuals these days having so much money in super – and quite rightly so, advisors actively encourage high net worth clients to contribute money into super for strategic and tax planning – it is important to ensure that superannuation death benefit proceeds are appropriately controlled on death.
Generally superannuation death benefit proceeds are managed through a form completed by a member to a super fund called a Binding Death Benefit Nomination. There are, however, very strict rules around how this form must be prepared and executed, and more often than not, a form that has been prepared with the best of intentions, if it is technically not compliant with the strict standards as set out in the Superannuation Industry (Supervision) Act 1993 (Cth) and the Superannuation Industry (Supervision) Regulations 1994 (Cth) then it carries a strong risk that it may in fact be invalid leading to an individual’s super ending up in the hands of someone who they did not want it to go to.
This was illustrated very clearly in a recent case of the Queensland Supreme Court Munro & Anor v Munro & Anor. The case came about due to a dispute between the trustee of the super fund and two of the members’ executors about a binding death benefit nomination that had been executed by the deceased super fund member.
A brief outline of the facts is set out here:
- Mr Munro and Mrs Munro were trustees of their self-managed super fund.
- Mr Munro had executed a Binding Death Benefit Nomination Form which had been prepared by his accountant.
- It is interesting in this case that Mr Munro himself was a solicitor.
- Mr Munro had nominated his beneficiary as “Trustee of Deceased Estate” and indicated that he wished 100% of his superannuation death benefit proceeds to go to that nomination.
- Mr Munro died and he was survived by his wife and two daughters from a previous marriage.
- The executors to Mr Munro’s will were Mrs Munro, and Mr Munro’s two daughters from a previous marriage.
- After Mr Munro’s passing, Mrs Munro’s own daughter was appointed as an additional trustee of the super fund.
- A dispute arose between the trustees of the super fund and Mr Munro’s daughters when the trustees noted that they intended to use their own discretion as opposed to following the nomination in the Binding Death Benefit Form, because in their view, the form was invalid.
- Mr Munro’s daughters therefore sought an order from the court stating that the nomination was binding upon the trustees.
- The Supreme Court of Queensland considered the matter and noted that the wording that had been used on the form – “Trustee of Deceased Estate” – did not comply with superannuation law and with the superannuation trust deed.
- For this reason the Court held that the Binding Death Benefit Nomination Form was invalid and therefore not binding upon the trustees of the super fund.
What this case clearly illustrates is that completing a Binding Death Benefit Nomination Form is not a simple task. Just because a form may look and appear simple, that does not mean that an individual should not seek advice when completing it.
In this particular case, Mr Munro himself was a solicitor, and his accountant had prepared the form and it was still invalid!
Therefore it is vital that appropriate advice is sought at the correct time – ie when an individual has capacity and all aspects of estate planning are considered in accordance with the appropriate legal and tax advice so that documents can be prepared which are effective and control your asset base in accordance with your wishes.
After all, you have worked hard during your lifetime to accumulate this wealth, surely it is worth making an appropriate plan now as to how that will be transitioned upon your death?
So don’t take short-cuts or leave things to chance especially after the Munro case – get your documents reviewed including your Will, Trust Deed, Super fund Deed and Binding Death Nominations and arrange an estate plan that will work!
If you would like a review of your personal situation please contact firstname.lastname@example.org.