Superannuation benefits are not automatically assets that fall within the estate of a person after their death. Without additional and proper written directions, what happens to a person’s super after death is decided by the Trustee of that person’s super fund. With well over half a million self-managed super funds (SMSFs) now registered in Australia, more and more people have direct control over their superannuation as Trustees of their own funds. Without careful consideration and planning, your superannuation funds may not end up where you want them to after your death, as was recently the case in Western Australia.
In that case, Ioppola v Conti, a husband and wife were the sole members of a SMSF. The wife in her Will, explicitly stated that her substantial superannuation funds were to be divided between her children and not her husband. She did not have the proper written documentation prepared in her SMSF to reflect this. Upon her death, her husband, despite the Will, paid all his wife’s funds to himself. The SMSF’s trust deed gave the trustee broad discretion to pay that benefit to any spouse, child or other person who, in the opinion of the trustee, was dependant on her at her death.
The children challenged the actions of the Trustee husband in the Supreme Court of Western Australia arguing that as executors they should be appointed as a joint trustee of the SMSF along with their father, to have some measure of control over the distribution of their mother’s funds. This argument was rejected on the grounds that while superannuation legislation does allow for such an appointment, it is not mandatory. The children also argued that the Trustee did not act in a bona fide manner as required by the SMSF’s trust deed. This argument was also rejected on the basis that the Trustee was entitled to ignore the directions of the Will when making its decision
Unfortunately the final score in this match was SMSF 1 Will 0. The husband was able to retain the superannuation and it did not go to her children in accordance with the mother’s Will.
This situation would not have arisen if the wife had a binding death nomination or a death benefit agreement in place at the time of her death. A binding death nomination must be renewed every 3 years while a death benefit agreement is permanent until revoked. A solicitor who is preparing a Will for you can identify issues such as this and ensure that your true intentions are properly documented. Whilst we did not see in this case if the solicitor had prepared her Will, if a Will is prepared by a solicitor and it falls short of doing the job intended, there are also options of claims being made against the solicitor for negligence. The above illustrates why it is best not to use DIY Will kits and to get proper advice, as it gives your loved ones proper protection and gives you peace of mind.