Dispute over Superannuation

James McIntosh died without leaving a will.  His mother, Elizabeth McIntosh, was granted administration of his estate.  Elizabeth and James’ father, John McIntosh, were divorced and their relationship was acrimonious.

James’ ordinary estate was relatively modest.  However, the death benefits under his superannuation accounts totalled about $500,000.

James and his mother had lived together and were in an inter dependant relationship.  This meant that any superannuation proceeds that she received would be free of tax.  As the father was not in such a relationship, any moneys that he would receive would be taxable.

Elizabeth made an application to the superannuation trustees who agreed to pay all the superannuation proceeds directly to her and not to the estate.

The Supreme Court of Queensland found that in so doing, Elizabeth was in breach of the duty which she owed to the estate arising from her position as administrator.  By making an application to the superannuation trustees that the money be paid to her personally she had placed herself in a position where her duty as administrator of the estate was in conflict with her personal interest.  She was effectively required to pay the superannuation proceeds she received into the estate.  As a result the deceased’s father was entitled to receive an equal share of the superannuation proceeds.

The Court recognised that if the deceased had made a binding death benefit nomination with his superannuation trustee, the trustee would have no alternative other than to pay the proceeds to the nominated person.

In the course of his decision the Judge made an interesting observation that if Elizabeth had been named as executor in James’ will, she would have been entitled to make submissions to the superannuation trustee that the proceeds be paid to her personally.  He stated that this situation was a general exception to the rule of conflict of interest because the testator would have known that by nominating his mother as executor she would have this potential conflict of interest.

It would appear that Elizabeth’s big mistake was applying for administration of the estate.  If John McIntosh had applied, or if she had referred administration to a trustee company, then she would have been allowed to make submissions to the superannuation trustee that the moneys be paid to her because of her inter dependant relationship.  If the superannuation trustee had accepted her submission then she would have no obligation to account to the estate or to John McIntosh.

McIntosh v McIntosh [2014] QSC 99

For more information on this update or any other matter please contactDavid Miller on (08) 9321 3755.

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