A recent decision of the Supreme Court of Western Australia highlights the importance of recognising the different estate planning considerations that apply to a person’s actual assets which they are capable of leaving by will and superannuation entitlements.
Mrs Conti died in 2010, leaving a will naming her children as her executors. The will also contained a direction that her superannuation entitlements be paid to her children and not to her husband.
The deceased and her husband were the joint trustees and the only members of a self managed superannuation fund (SMSF). The terms of the SMSF trust deed provided that in the absence of a binding written nomination, the trustees of the SMSF had a discretion to pay or apply the deceased’s superannuation balance to her spouse or her child or financial dependant.
The deceased had made binding nominations in 2002 and 2006. However, since a binding nomination lapses after three years, there was no current binding nomination in place at the time of her death.
Shortly after her death, her husband nominated a company of which he was the sole director to become the trustee of the SMSF. He, as the director of the company, then made a determination that the deceased’s superannuation balance be paid to himself.
The children, as executors of her will, challenged his conduct on the basis that he should have nominated them as additional trustees of the SMSF. They alleged that the trustee of the SMSF had acted improperly in determining to pay the deceased’s superannuation balance in the way that he did.
The court found that there was no legal basis on which the executors could insist on being appointed as trustees of the SMSF. The court also found that the trustee of the SMSF was entitled to ignore the directions in the will in relation to the deceased’s superannuation balance and that his decision could not be challenged as having been made in bad faith.
The decision highlights the problems associated with binding death benefit nominations. To be effective, the nominations must be renewed every three years and if the time limit is missed the binding nominations become ineffective. Also, if the person concerned were to lose capacity, they would also lose the ability to renew any binding nominations.
Ioppolo & Hesford v Conti [2013] WASC 389.
For more information on this update or any other wills and estate matters please contact David Miller or the Estates Team on (08) 9321 3755.
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