Disputes over binding death benefit nominations are becoming more common, both in relation to self-managed superannuation funds and retail funds.
The main causes for the disputes are:
- issues of compliance with the terms of the super fund’s trust deed; and
- cognitive capacity at the time the nomination was made.
In a recent Queensland decision, the binding nomination had been made by a husband leaving 50% of his self-managed super balance to his second wife. A son from the deceased’s first marriage challenged the nomination, arguing that it didn’t comply with the terms of the trust deed. The son was successful. The reason for the success was that, although the nomination had been filled out in compliance with the requirements of the trust deed, the husband hadn’t given notice of the nomination to a second trustee of the trust. A failure to give notice formally to the second trustee led to a conclusion that the nomination had not been made in compliance with the terms of the trust.
This case is now one of many that demonstrate just how important it is to strictly follow the terms of the trust when making a superannuation nomination in relation to a self-managed super fund.
In relation to cognitive capacity, a recent NSW case has focused on the issue of the capacity of the deceased at the time a nomination was made in relation to his self-managed super fund balance. The deceased was in hospital and on morphine at the time the nomination was made in relation to his $4 million death benefit. The argument is over whether the deceased knew what he was doing when he signed the nomination.
Although the outcome of the case remains to be seen, it is sure to attract a lot of attention because the level of cognitive capacity to make a nomination is currently unclear.
Capacity, and whether the deceased knew what they were doing when they made their nomination, has also arisen in a number of disputes over retail funds. There are now several decisions of the Superannuation Complaints Tribunal and the Australian Financial Complaints Authority where capacity has been either the main cause of the dispute, or a factor in the dispute.
The message here is that challenges to superannuation nominations are becoming more frequent.
If you are concerned that you may have reason to challenge a superannuation nomination, or worried that someone might try to challenge your nomination, you can reach out to Margaret Arthur in HopgoodGanim’s Estate and Succession team or a member of our Self-managed superannuation practice.