Superannuation Death Benefit Claims
Duty of Estate Administrator vs Their Role as Your Dependants
An executor of a will, or an administrator of an intestate estate (where a person dies without leaving a valid will), has a duty to act in the best interests of the beneficiaries of the estate.
That is a principle that we all take comfort in.
However, a conflict arises if the person you would like to receive your superannuation death benefits directly (for example, your spouse or child) is also administering your estate.
Without the consent of the estate beneficiaries, or a specific clause in the will to the contrary, the duty to act in the best interests of the beneficiaries of the estate includes the duty to only claim superannuation death benefits on behalf of the estate for distribution amongst the estate beneficiaries (i.e. not claim such benefits personally).
This conflict situation has caused terrible problems for executors appointed under a will, or administrators entitled to act under intestacy rules.
In many cases, unless the beneficiaries of the estate consent to the executor/administrator claiming the superannuation entitlements personally, they are forced to step down to pursue their personal claim on the superannuation entitlements. That results in them not controlling the estate assets and administration. A very difficult situation for those closest to you.
If you have superannuation entitlements that you intend to benefit the person who will administer your estate, you need to either:
- leave a valid binding death benefit nomination with your superannuation fund to ensure that it pays your entitlements to the dependant/s you want; or
- specifically state in your will who is to receive the superannuation entitlements and/or that the executor is entitled to make a personal claim for your superannuation entitlements to be paid to them if that is intended.
Bob dies leaving his wife of 20 years, Sue, their 19 year old son, Jack, and a 32-year-old daughter to an earlier relationship, Emma. His will appoints Sue as the executor and leaves Sue 3/4 of his estate (Bob is confident that Sue will look after Jack) and 1/4 of his estate to Emma (a daughter he is proud of, who is successful and independent in her own adult life).
Bob and Sue have numerous small joint bank accounts and own their home as joint tenants - these automatically belong to Sue as surviving owner. Bob also had in his sole name a share portfolio that he inherited from his late uncle, his boat and a small bank account in which his Lotto wins were banked. These items fall into his estate and Sue always understood that was Bob’s intention.
Bob held a Sunsuper superannuation account with a balance of $280,000 and insurance of $900,000 (his death benefit entitlements), however, has not left a valid binding death benefit nomination with Sunsuper (it lapsed after 3 years and he forgot to re-sign it) and his will is silent in relation to his superannuation.
As Bob and Sue held a mortgage on the jointly owned home, they had spoken about the life insurance being available for Sue so she would not be under financial stress if Bob passed.
However, unless Emma consents to Sue claiming the Sunsuper funds personally, Sue is faced with choosing between:
(1) assuming the role as executor of the will to deal with the estate administration, in which event
- Sue cannot make a personal claim on the Sunsuper as the wife;
- Emma and Jack can make a personal claim on the Sunsuper as Bob’s children; and
- Sue must make a claim on behalf of the estate - and if the estate is successful Sue only receives 3/4 of it!
(2) the decision to personally claim all the superannuation death benefits, in which event she has no control over the dealings with the other estate assets.
It has placed a strain on Sue’s previously good relationship with Emma and opened potential legal disputes at a time that is already extremely difficult for everyone.
All too often we meet with grieving family members who are placed in this situation.
Updating your Will and/or ensuring you have a valid binding death benefit nomination in place (and that your attorney can keep it in place should you lose capacity!!!) will give you peace of mind.
A review of both your will and enduring power of attorney to address potential conflict issues is desirable.