Many individuals will have large superannuation benefits waiting to be cashed upon retirement, however, some people will sadly pass away before they are able to make a claim on their benefit. So the question will arise of how will a person’s superannuation entitlements be dealt with upon their passing, is a natural line of inquiry. Well, a member of a superannuation scheme is able to create a gift to their beneficiaries, but there are many considerations that need to be taken into account when bestowing a superannuation death benefit, and the process can be complex.
Can a superannuation benefit be dealt with in the same way as other trust instruments?
Much like other trusts, the death of a superannuation fund member does not affect the legal title of the trustee to the fund. However, the difference in regards to a superannuation fund, is that under reg. 6.21(1) of the Superannuation Industry (Supervision) Regulations 1994 (the Regulations), requires that upon the death of a member, their benefits must be cashed, as soon as it is practical. Although, reg. 6.21(3) will also consider an action of rolling over a benefit as soon as it is practical for immediate cashing, as a sufficient course of action. The important thing to be aware of is that after the death of a superannuation fund member, their entitlements can no longer be left in their account, and must be dealt with in the manner which conforms to the Regulations, as well as the Superannuation Industry (Supervision) Act 1993 (the Act).
So, unlike a discretionary trust, a superannuation entitlement does not continue beyond the death of a member. Additionally, unless the benefit is paid into the estate, or forms part of the estate as an asset of the deceased during the time of death, then the benefit may be considered as separate, to the estate.
Can a superannuation benefit be paid into the estate?
There may be an obligation for the superannuation death benefit to be paid into an estate via a trust deed, or a binding death benefit nomination. Furthermore, a trustee is able to exercise their discretion under a trust deed by paying their entitlements into the estate, and if such a course of action is undertaken and is not challenged, the benefit will then form part of the estate.
If the superannuation benefit has become part of the estate, then the ordinary family provisions will be applicable.
What happens to the superannuation benefit if there is a dispute?
If a person believes that a superannuation death benefit was, or may have been paid to the wrong person, a complaint can be made to the Superannuation Complaints Tribunal (SCT). The outcome of a dispute arising out of a superannuation death benefit is contingent on the circumstances surrounding the dispute, and on nature of the trust deed.
Perhaps the thing to keep in mind if a person chooses to dispute a superannuation death benefit, is that the decision of the SCT is governed by different decision making and eligibility criterion when compared to other tribunal bodies.