Do you feel you have been unfairly denied a death benefit from a superannuation fund? There is probably no area of dispute more common than the superannuation death benefit, and no specific benefit more misunderstood.
Learning more about how superannuation death benefits are managed and disbursed can help you properly arrange your own superannuation fund for distribution. Hiring a superannuation lawyer to assist with any disputes can help you achieve a successful settlement in cases where you may have a valid claim about benefits paid.
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Unlike your personally held assets, such as your house, car, savings, investments, and all personal effects, your super is held in a trust. The super fund trustee manages disbursements, and they in turn are governed by laws that regulate superannuation.
Your super death benefit therefore can’t be included in your will as a direct disbursement. Instead, you must choose a beneficiary or beneficiaries (known as binding death benefit nomination) to receive the disbursement in a lump sum upon your death.
You can name a variety of people as beneficiaries for lump sums disbursed from your super death benefit, and you can name more than one person. The people you can name include:
Choosing the last option allows your superannuation fund death benefit to be disbursed in accordance with further guidance contained in your will, and allows you to leave funds to a broader range of people besides your dependents.
You may alternatively choose to name a reversionary beneficiary, which means instead of a lump sum paid to one or more death benefit beneficiaries, one person must be named to continue receiving your super benefits as a pension. It’s very important to keep your instructions up-to-date with your wishes. Those eligible to be paid a death benefit pension include:
You can choose to have a beneficiary receive a lump sum plus a smaller income stream if desired.
In most cases, Australian law will not allow superannuation death benefit funds to be used to pay off debts owed by the estate. It’s generally viewed as “untouchable” by debtors.
The exception is if you direct the superannuation funds into your estate, or if you fail to nominate a beneficiary and the trustee decides to pay the death benefit into your estate.
Tax treatment of a superannuation death benefit lump sum payout or pension will depend on several different factors, including whether the payout is derived from a tax-free component:
If you are a dependent receiving a lump sum, you won’t need to pay tax on the taxed element. If you are a non-dependent receiving a lump sum, you will be required to pay the equivalent of income tax as follows:
If you are a dependent receiving the benefit as an income stream, the super is being paid from a taxed superannuation fund, and either you or the deceased member were over 60 at the time of their death, the income will be tax-free.
If you both were under 60 at the time of death, the income from the taxable components of the benefit will be taxable, but you’ll be entitled to a 15% tax offset. When you turn 60, the disbursements switch to tax-free. If it’s paid from an untaxed fund, you’ll pay your maximum tax rate. Once you turn 60, you’ll be eligible for a 10% tax offset.
It’s best to contact financial advisers for a clearer understanding of what tax you may owe on a super death benefit payout. Without proper financial advice, you can run into trouble with relevant authorities.
If you fail to make a death benefit nomination, the trustee of the super fund ends up in control. They have the discretion to choose among your dependents and pay your death benefit to their choice of eligible beneficiaries. They may also simply assign the death benefit to your estate.
No nomination can lead to many disputes as beneficiaries fight for a share in the event of your death.
The most common type of death benefit nominations offered by typical corporate, industry, and retail superannuation funds, a non-binding nomination means you state who you want your death benefit to go to, but the trustee still has discretion over who receives your super funds and how percentages are allotted.
This allows them to take into consideration any recent changes in your personal circumstances or those of your beneficiaries that you may not have had time to adjust for. These could include if you had a new spouse at the time of your death, or if one of your beneficiaries has a clear and present need for extra funds.
The main issue with this choice is that if a trustee takes a long time to make their decisions, or pays the money directly to the executor of your estate, the funds could get tied up with everything else and not be released for a long time. Even then, if your will wasn’t clear, your real wishes may not be followed.
When you make a valid BDBN, you overrule trustee discretion on payment of your super death benefit. You can order payment from your benefit to specific beneficiaries you nominate, in specific proportions of your choice. This can speed payout after your death so your loved ones aren’t left wanting.
However, a BDBN will normally lapse after three years unless you renew it. If you do not renew your BDBN, it reverts to “no nomination.” Also, if you have a self-managed superannuation fund (SMSF) your trust deed may not allow a BDBN and you’ll have to nominate in accordance with the trust deed rules.
If you are named as a beneficiary of someone else’s superannuation death benefit, you will receive a disbursement when they pass. If someone disputes it, you’ll need a superannuation law firm to step in and help you defend your claim.
Likewise, if you aren’t named as a beneficiary, but are a qualified person under the law, and you think you were unfairly excluded or the owner of the super fund was coerced or manipulated in any way, you may have a reason to dispute their claim.
As a general rule, you have to lodge a complaint within 28 days of being notified about the erroneous payout of a death benefit.
If you end up in a superannuation fund dispute, either defending your own claim or disputing someone else’s, it’s important to remember that not everything is set in stone. Even with an assignment of the death benefit, disputes can still be made.
In one memorable case, Gerard Malouf & Partners defended a woman’s death benefit claim against her husband’s super fund. The deceased had formerly set up a business for his disabled son to provide him with a living. For 21 years, the son and father had been estranged.
However, that didn’t stop the son from trying to dispute his stepmother’s claim on the death benefit, and although we strongly believed she would prevail in court and obtain an 80% award, she accepted a settlement for 50%. Disputing further would have been well worth a little more time and effort.
Finding a law firm experienced in superannuation fund death benefit disputes can give you a better chance of successfully defending your rightful claim if someone else tries to dispute it. Likewise, we can help you if you think you were entitled to a death benefit and have been cut out incorrectly.
Superannuation death benefit disputes can be extremely involved and complicated. Superfunds are often mentioned in wills, but without the corresponding beneficiary named with the actual super trustee, this can lead to contradictions and extreme friction between potential beneficiaries.
In many cases, a dispute over superannuation death benefits arises because the super fund owner didn’t nominate a beneficiary, or their nomination lapsed. When this happens, it falls to the fund trustee to decide where the funds should be disbursed. They typically choose the deceased’s closest dependent or dependents, or on rare occasions will simply pay the funds into the deceased’s estate
If a trustee didn’t take into account or was unaware of an interdependency relationship between the deceased and another person, that person may seek to dispute the death benefit. If you can adequately prove the relationship, you may have an excellent chance of your dispute being met favourably.
In many cases, a superannuation fund death benefit may have been assigned to a nominated beneficiary for a lump sum disbursement that excludes another qualified recipient. This often happens if there is a situation with an estranged adult child. They may want to dispute a payout that went to a current spouse or significant other, or to a sibling or siblings. These are less likely to be met favourably.
If you think there is a likelihood of a dispute, you can proactively prepare a defense to benefit your nominated beneficiary or beneficiaries. Start by nominating beneficiaries through a non-lapsing BDBN if possible, and be very clear about who gets what percentage. Mirror your super death benefit nominations in your will for good measure.
Gather documentation about your beneficiaries, and prepare a statement regarding why you chose them and why they are the most valid choice. This can help in the event that, for some reason, your nomination doesn’t hold (more likely if you have a super or SMSF that doesn’t allow binding or non-lapsing binding nominations.)
You may also decide to name a personal legal representative who will be the executor of the estate as the beneficiary, and then direct disbursement of the funds in your will to whatever beneficiaries you choose. This gives you more flexibility and allows you to leave an inheritance to someone who might not be eligible as a nominated beneficiary under your super fund.
When you’re embroiled in a superannuation dispute, you need assistance from a team that understands all the intricacies of superannuation, including nominated beneficiaries of different types, and how or when a dispute should be filed.
Gerard Malouf & Partners provides you with solid representation during a difficult time in your life, helping manage your claim and ensure you receive your entitlements. We attend to the following:
We are well accustomed to walking our clients through the process up to and including dealing with processes triggered by the Australian Financial Complaints Authority (AFCA), where complaints are referred if the matter cannot be settled directly with the fund trustee.
If you are a beneficiary whose right to entitlement is being disputed, we offer vigorous defense of your rights and the same attention to detail to ensure a frivolous complaint doesn’t affect your inheritance. We understand how difficult dealing with these matters can be when you are already grieving the deceased.
Our goal is to streamline the superannuation dispute process and bring about a conclusion that is fair for you and leaves you with the maximum disbursement possible.
Gerard Malouf and Partners already have an established track record of getting injured people in need the justice they deserve. Over the years, back injuries have emerged as one of our specialties. In September 2020, we helped a school teacher who had a slip and fall on the job get a much-needed compensation package of $530,000 in damages. Our team was able to show that uneven ground at work was a major contributing factor to the school teacher’s injured back and knees. We successfully settled a permanent impairment claim for 40% Whole Person Impairment with the Workers’ Compensation Insurer. She also became eligible to potentially bring an additional claim for Common Law Modified Damages, also known as Work Injury Damages which is a claim in negligence.
In another instance, from July 2020, our client sustained lower back injuries while shopping at a Strathfield, NSW grocery store. The store had left a stack of boxes hidden behind a trolley, which our client tripped on. On the advice of our team, our client saw a medical professional, which both opened up his legal options and allowed him to get the specialised care, including a radiological investigation, that he needed. Meanwhile, our solicitors built the man’s case with the store’s accident report and CCTV footage.
After failing to engage in a settlement with the grocery store, we took the store to court on our client’s behalf, ultimately winning him a $60,000 payout. No matter the setting of your injury, our team has the expertise needed to get you the compensation you deserve.
For decades, the team at Gerard Malouf and Partners have been leading the way and fighting for people just like you. Whether you’ve been wronged through a motor accident, public liability, medical negligence, workers’ compensation issue, or other dispute, our solicitors and barristers have a winning history you can rely on.
Gerard Malouf and Partners have over 35 years experience managing superannuation death benefits. With a unique service guarantee, and our triple-C attitude, we would be happy to talk about your superannuation death benefit claim.
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