As superannuation account balances grow, who gets the death benefit after you are gone is becoming more fraught, especially among those with complex family arrangements.
The increasing prevalence of blended families is a common factor in many of the death benefit disputes coming before the Superannuation Complaints Tribunal. What most people do not realise is that usually their choice of who can share in the death benefit can only be controlled if they have made a "binding" death benefit nomination with their fund that is valid at the time of their death. Most funds offer binding nominations, but all funds allow members to nominate "preferred" beneficiaries, including how to divide the death benefit between them. But preferred nominations are only a guide to trustees of the fund and this is where disputes can arise.
Regardless of whether it is a preferred or a binding nomination, or no nomination is made, the beneficiary must fall within the definition of "superannuation dependant". The definition of superannuation dependant is wide. It includes those receiving financial support from the fund member. But that is not all. Under superannuation law, a dependant can include an adult child who is financially independent. It includes, among others, a person in an "interdependency relationship": that is, living in a close personal relationship involving financial support and personal care.
The tribunal regularly gives examples of real disputes. In one recent case, it took three attempts to produce the right outcome - two proposals for distributions of the death benefit by the trustees of the fund and the final arbitration by the tribunal. Potential beneficiaries need to look carefully at the distribution proposed by the superannuation fund of a loved one and not assume the fund is across all of the facts. And for those with complex family arrangements, the advice of a lawyer and the drawing up of a will is strongly advised in any event, even if the death benefit question looks straightforward.
Instead of nominating a person, a death benefit can be left to the legal representative of the estate - that is, the executor of the member's estate - and distributed in accordance with the will. That can be a way of benefiting someone who is not a potential superannuation dependant. But a will can always be challenged, including by superannuation dependant who has missed out.
Rigby Cooke Lawyers special counsel Rachael Grabovic says if you want to leave the death benefit to specific beneficiaries and leave people out, the binding nomination can be a safer bet than having it paid to the estate. A binding nomination (unless it is for a self-managed super fund) has to be renewed every three years or it will lapse.
For self-managed super funds the binding nomination may be lapsing or non-lapsing, depending on the fund's deed. Grabovic says someone who is a dependant of the fund member but left out of a binding death benefit nomination would not have recourse to the tribunal. The tribunal does not have the power to override or alter a valid binding death benefit nomination.