The facts

Mr Munro practised as a solicitor during his working life and died in August 2011 aged 66 years. He was survived by Mrs Munro and two adult daughters of his previous marriage. Mr Munro’s will provided for the appointment of his daughters as his executors of his will dated 25 May 2006. His will provided for a gift of $350,000 to his wife and the balance of his estate to be paid into two testamentary trusts (for the benefit of his daughters) in equal shares.

Mr Munro attempted to make a number of death benefit nominations during his lifetime in respect to a SMSF that was established on 19 July 2004 as “The Barrie and Suzie Super Fund” (“the BSS Fund”). The latest nomination of beneficiary form was dated 22 September 2009 and headed “Binding death benefit nomination” in which Mr Munro nominated the “Trustee of Deceased Estate” to receive his superannuation death benefits.

Following Mr Munro’s death, his step-daughter (Ms Pooley) took his place as a Trustee of BSS Fund in February 2012. Mrs Munro and Ms Pooley as the trustees proceeded to notify Mr Munro’s executors that the nomination dated 22 September 2009 was invalid, in accordance with the provisions of the SMSF deed.

Findings

The court inferred that someone at Mr Munro’s accounting firm prepared the form of nomination of beneficiary that Mr Munro signed.

The estate consisted of minimal funds. There were bank accounts held jointly and a Range Rover, which was in dispute.  The estate also had debts to the estate solicitors.

The court considered whether the death benefit nomination was required to comply with superannuation legislation. The court found that the death benefit nomination was not required to comply with superannuation legislation as the fund was a SMSF. The court held that that as the superannuation legislation did not govern the creation of a binding death benefit nomination, the nomination needed to comply with the SMSF deed requirements.

The court went on to consider what Mr Munro had meant by the words “Trustee of Deceased Estate” within the SMSF deed. The court noted that SMSF deed permitted the members of The BSS Fund to nominate one or more nominated dependants or the legal personal representative (which includes an Executor) of the member.

The term “executor” and the term “trustee” may be used interchangeably. The executor’s role is to administer the estate (collect assets and pay debts). The trustee’s role commences once the executor’s role has been concluded. The deceased’s daughters were due to become the trustees of the testamentary trusts created by the will once the administration duties had been finalised. The administration duties had not been finalised at the date of the application.

The court found that the nomination form made on 22 September 2009 was not compliant with the SMSF deed and Mrs Munro and Ms Pooley as trustees of the BSS Fund were not bound to follow the nomination.   

Conclusion

The decision in Munro v Munro is another illustration of the difficulties that may be encountered in estate planning. Such simple mistakes are often not discovered until after someone has passed away, leaving the issues to be clarified by surviving family members, often in expensive litigation before the courts. The importance of strict compliance in the preparation of binding nominations is echoed by the decision in Munro v Munro. The decision highlights the need to carefully read the SMSF deed before attempting to prepare a form of nomination of beneficiary.