D13 - 14/048 [2013] SCTA 124

The Superannuation Complaints Tribunal of Australia (Tribunal) recently considered how the superannuation death benefits of a 16 year old member should be paid.

At the date of his death the deceased member had death benefits in the amount of $33,673, mostly comprising insurance.The deceased’s parents had separated when the deceased was 7 years old. Pursuant to a Family Court Order, the deceased resided with his mother.

When the deceased initially joined the superannuation fund he nominated his mother as the preferred beneficiary. Twice after joining the fund the deceased completed a change of membership details form and each time confirmed his nomination of his mother as the beneficiary. This nomination was not a binding nomination.

The superannuation trustee determined to pay all of the death benefits to the mother.

The deceased’s father then disputed the trustee’s determination and brought the matter before the Tribunal. The father claimed that the death benefits should either be distributed equally between himself and the mother or alternatively equally between the deceased’s two siblings.The superannuation trustee determined to pay all of the death benefits to the mother.

The basis of the father’s claim included that he had financially supported the deceased, that the mother influenced the deceased’s decision to nominate her and due to the mother’s financial circumstances a majority of the death benefits would be paid to her creditors.

The mother denied many of the father’s statements and claimed that she had a very strong relationship with the deceased.

Superannuation death benefits do not automatically form part of a person’s estate. Subject to the relevant superannuation trust deed, the Superannuation Industry (Supervision) Act 1993 and the Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations) the superannuation trustee determines the payment of death benefits.

In the absence of a binding nomination directing the trustee how to pay the death benefit (if the superannuation fund permits binding nominations) the superannuation trustee may consider the wishes of the deceased, the financial circumstances and needs of the potential beneficiaries and the relationship between the deceased and the potential beneficiaries.

A superannuation trustee must only pay a member’s death benefit to:

  • One or more of the member’s dependants.
  • A person who was in an interdependent relationship with the member.
  • The member’s legal personal representative.

In this case the parents were not dependant on their son nor were they in an interdependent relationship with him. As the deceased did not have a Will, there was also no legal personal representative.

The superannuation trustee considered the SIS Regulations and the trust deed for guidance.

Relying upon regulation 6.22(3) of the SIS regulations and a clause in the superannuation trust deed allowing the trustee to pay death benefits to a non- dependant in certain circumstances, and giving weight to the non-binding nomination that had been prepared, the trustee resolved to pay the death benefits to the mother.

When reviewing the trustee’s decision the Tribunal attached significance to the fact that the deceased confirmed his nomination for his mother to receive the death benefit on multiple occasions and the evidence placed before the Tribunal indicated that they had a strong relationship. The Tribunal also considered the relationship between the deceased and his parents and the circumstances of each parent. The Tribunal confirmed the trustee’s decision to pay the death benefit to the mother was fair and reasonable.

Comment: This case highlights the importance of considering how your death benefits are to be paid upon death. If the superannuation fund trust deed permits, the preparation of binding nominations may be appropriate but careful consideration should be given to the effect of such a nomination.

This case also reminds us of the unfortunate uncertainties of life and that it is not only those older in age who need to consider their estate planning. Whilst in this case the deceased was only 16 years of age and therefore unable to prepare a Will, it does demonstrate that superannuation death benefits and more particularly the insurance component of these superannuation policies can be significant.