SAM has diligently contributed to his superannuation fund over the years and it is now his biggest asset.
Sam executes a non-lapsing binding death benefit nomination, directing who shall receive his superannuation upon his death.
He nominates his wife, Wendy, as the recipient of 80 per cent of his “death benefit”, which includes a life insurance component.
He nominates his two nephews to each receive 10 per cent of the remaining balance.
Sam’s superannuation fund requires the death benefit nomination to be renewed every three years, otherwise it “lapses”.
The superannuation fund does not remind Sam to attend to this, but he is aware of this requirement and ensures that the nomination is renewed accordingly.
When Sam passes away, his superannuation fund advises that his nomination is not valid because his nephews are not dependents.
Under superannuation law, nominations can only be made in favour of defendants who include spouses, children, other dependent persons, or your estate.
Children who are not financially dependent can nonetheless be validly nominated.
Due to Sam’s error, the superannuation fund holds a discretion to deal with Sam’s superannuation.
It comes to light that Sam had an estranged son from a brief relationship when Sam was in his 20s.
The superannuation fund has difficulty finding this child and the process of distributing Sam’s superannuation encounters severe delays.
If Sam had nominated his estate to receive his superannuation, his will could have given effect to a distribution of the death benefit to his nephews.
Ultimately, the superannuation fund decides to pay 20 per cent of Sam’s substantial superannuation fund to his estranged son.
Wendy unsuccessfully challenges the decision, leading to further delays.
A recent survey found that most super fund members stated that they had not been contacted by their fund in relation to the making of a death benefit nomination and 87 per cent of people did not report having a nomination in place.
Unfortunately, the result is that many grieving widows are waiting too long for superannuation payouts and, in some cases, payments are made against the member’s wishes.
If you have a request for a Hypothetical, call Manny Wood on (02) 66 487 487 or email manny@tblaw.net.au.
This fictional column is not legal advice.
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