LEGAL LESSON: The distribution of the estate superannuation entitlements did not go the way of the children.
LEGAL LESSON: The distribution of the estate superannuation entitlements did not go the way of the children. KatarzynaBialasiewicz

A super surprise in court for Karen's kids

CHRIS and Karen are married but estranged.

They are sole members of a self-managed superannuation fund and when Karen makes a will she appoints her two children executors.

Karen leaves her interest in the super fund to her children and specifically states she does not wish Chris to share in her entitlements.

When Karen passes away her superannuation entitlement is $650,000 but while she made a binding death benefit nomination in favour of her children, they discover it has lapsed.

The trust deed states in the absence of a valid binding nomination the trustee has absolute discretion to apply the superannuation entitlements of a deceased person to their spouse or the deceased's children.

After Karen's death Chris establishes a corporate trustee of the superannuation fund and passes a resolution to pay himself the whole of her entitlements.

The children commence action against him and the court states Karen's will had no bearing on how super entitlements were to be paid.

The court also states because the binding nomination had lapsed, it was not relevant and ultimately finds Chris was able to pay the whole of Karen superannuation to himself, despite it being clearly against her wishes.

Karen's children miss out on obtaining a share of their mother's superannuation entitlement and are also ordered to pay Chris's legal costs.

This case demonstrates the importance of proper estate planning, particularly in circumstances where superannuation is involved.

It is important to understand that a reference in your will to the distribution of superannuation entitlements may not have any legal effect.

It is also important to make a binding death benefit nomination and to understand that in some circumstances, the nomination may cease to be valid after a lapsing period of commonly three years.

If you would like Manny to address a legal issue email manny.wood@ticliblaxland.com.au or call 6648 7487.