Superannuation – To Bind or Not To Bind
Case Review: Stock (as Executor of the Will of Mandie, Deceased) & Ors v NM Superannuation Proprietary Limited & Ors
A recent decision of a superannuation trustee (and subsequent decision of the Federal Court on appeal) is a timely reminder for clients to carefully consider whether or not to make a binding nomination in respect of their superannuation death benefits.
Facts
David Mandie (the founder of James Richardson the highly successful duty-free retailer) died in 2011 and was survived by three adult children – one daughter and two sons.
At the time of his death, Mr Mandie was a member of a super fund and held a significant death benefit. Although the super fund permitted a member to make a binding death benefit nomination, Mr Mandie had not done so.
Mr Mandie had previously fallen out with his two sons in relation to the operation of the business. The parties entered into a settlement agreement which saw Mr Mandie’s sons receive substantial assets and which also contained a clause preventing them from claiming against him or his estate.
Despite the settlement agreement and Mr Mandie leaving his two sons out of his Will, the superannuation trustee determined to pay each child a third of the death benefit.
Decisions of SCT and Federal Court
On appeal, the Superannuation Complaints Tribunal (SCT) held that superannuation was not an asset of the estate and a trustee is therefore not bound to follow the directions of a Will.
Although the trustee may look at the Will and any other document which purports to state the deceased’s wishes, the role of the trustee is not to resolve issues in a deceased member’s estate.
The SCT found that it was not unreasonable for the trustee to follow its usual practice to pay dependants rather than the estate and that an equal distribution was fair and reasonable in the circumstances as there was no evidence that any one child deserved a greater share.
The decision of the SCT was appealed to the Federal Court.
In dismissing the appeal, the Court found that the SCT was under no obligation to have regard to the reasoning which led to the trustee’s decision or to form a judgment as to whether it had acted improperly.
It was simply to determine whether the decision was fair and reasonable in the circumstances which it had done and therefore there was no error at law which would allow the Court to overturn the decision.
Comment
The case highlights that a superannuation trustee has a broad discretion to determine how to distribute a death benefit and that there are limited grounds to appeal against the exercise of this discretion.
Accordingly, it is important to carefully consider whether or not to make a binding death benefit nomination as part of a client’s estate plan.
If you would like further information on binding death benefit nominations and related issues, please contact Leanne Matthewson, on 07 4616 9898.
This publication has been carefully prepared, but it has been written in general terms and should be viewed as broad guidance only. It does not purport to be comprehensive or to render advice. No one should rely on the information contained in this publication without first obtaining professional advice relevant to their own specific situation.
