Deceased Estates: Superannuation and Trustee Duties

When it comes to estate planning, it's important to understand that superannuation does not automatically form part of a deceased estate. Superannuation funds are held separately and are governed by trustees who determine the disbursement of funds. Unless a deceased made a binding death benefit nomination, the discretion to decide on the recipient of the deceased’s superannuation ultimately rests with the trustee.

Searching for superannuation?

Locating the superannuation of a deceased loved one can be a challenging task. This may seem especially daunting if the deceased had a varied career spanning different industries and professions. However, most industries typically have designated superannuation funds that are commonly used by workers in that particular field.

Keep in mind that there's a possibility the deceased may have used other superannuation funds as well or perhaps had a self managed super fund.

Depending on your situation, the best place top start is by making enquires with the deceased’s accountant and/or financial advisor.

If that is not an option, or yields no result, then the next suggestion would be to search the Australian Taxation Office online ‘SuperSeeker’ service. This platform allows you to conduct a searches for a deceased person's superannuation at no cost. To use this service, you will need to have the deceased’s tax file number at hand.

Who is eligible to claim the superannuation?

The primary beneficiaries of a deceased person's superannuation are typically the deceased’s spouse, children and/or other financial dependents.

If the deceased did not have a spouse, children, or financial dependents, the trustee of the superannuation fund may have the discretion to distribute the funds to other individuals in the deceased's life who can demonstrate a legitimate claim. This decision falls to the trustee when there is no binding death benefit nomination in place.

If the trustee decides to distribute the funds to someone who is not a spouse, child, or financial dependent, there may be tax implications for the recipient. For this reason, obtaining tax advice is always strongly advised.

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How does the trustee determine the recipient?

In the absence of a binding death benefit nomination, the trustee must give ‘real and genuine consideration’ to variety of factors when deciding on how to distribute superannuation funds. Without limitation, these factors may include:

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- The relationship between the claimant and the deceased

- The claimant's financial situation

- The extent of the claimant's dependence on the deceased

- Any other parties making a claim to the deceased's superannuation

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What constitutes ‘real and genuine consideration’ was the key question for the Court to consider in two recent matters, being, Owies v JJE Nominees Pty Ltd?[2020] VSC 716 and [2022] VSCA 142 (Owies) and Wareham and Anor ATF the Swanson Superannuation Fund v?Marsella?[2020] VSCA 92 (Marsella).

Owies

The Owies case concerned a dispute regarding the management of an inter vivos family trust. Key issues at the heart of this case included the proper interpretation of the trust deed, the roles and obligations of the trustees, and the entitlements of the beneficiaries in terms of access to information and accountability.

On appeal, the court found that the trustee had repeatedly failed to act impartially and in accordance with the duties imposed by the law, to give real and genuine to interests of two primary beneficiaries. The court also found that the relationship between the trustee and beneficiaries had deteriorated to an irreparable extent, rendering it detrimental to the beneficiaries' best interests for the trustee to remain in office. As a result of the trustee was removed from their position.

Marsella

In the Marsella case, a daughter and her husband served as trustees for her deceased mother's self-managed super fund. In their role as trustees, they made a decision to allocate the entire death benefit of the mother's fund to the daughter trustee, completely excluding the deceased's husband, who was the stepfather of the daughter.

On appeal, the removal of the trustees was upheld. This decision was based on the fact that the trustees had exercised their discretion without ‘real and genuine consideration’ for the other dependants of the funds, which included the deceased’s husband. Consequently, the trustees' decision was deemed invalid and set aside.

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If you are thinking of making a claim or you are a trustee that has received a claim, then it is important you obtain professional legal advice at the outset to avoid any unnecessary disputes arising.