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Superannuation Death Benefits: part of the estate or not?

Posted by Reg Biddulph | Sep 09, 2018 | 0 Comments

In a decision handed down on the 7th September 2018 [Burgess v Burgess (2018) WASC 279],  the Supreme Court of WA has affirmed the application of he Queensland case of McIntosh v McIntosh 2014 QSC 99 in Western Australia.

The case involved the widow of a man who died intestate with two young sons.  Death Benefits (including large insurance components) were paid by various super funds.  One payment was received prior to Letters of Administration being obtained.  However, a payment of $338,000 was paid after Letters of Administration were obtained to the widow personally (that is, as a financial dependant within the meaning of the Superannuation Legislation).  A further amount of $160,000 was also expected to be paid from a third Super Fund (AMP).

The widow (Mrs Burgess) applied to the court (naming herself as a Plaintiff and one of the Defendants) seeking orders to the effect that she did not have to account to her children (represented by the Public Trustee) for the funds that she had received (or would in the future receive).  The Public Trustee neither opposed nor consented to the application.  Mrs Burgess' counsel sought to distinguish the case of McIntosh, essentially on the grounds that because she had disclosed to the various Super fund trustees that she was applying for payment of the death benefits personally and was also the Administrator, that no conflict arose.

Justice Martin did not accept this.  He said (Para 84):

In an age of increasing moral ambivalence in western society the rigour of a court of equity must endure. It will not be shaken as regards what is a sacred obligation of total and uncompromised fidelity required of a trustee. Here, that required the administrator not just to disclose the existence of the (rival) estate interest when claiming the superannuation moneys in her own right from the fund trustee.

He also said (para 86):

Nor am I persuaded, much as I personally do sympathise with her position as a sole parent left looking after two young boys, that it is appropriate to excuse a breach of trust to relieve her from personal liability (in effect, towards her children at some possible time in the future) - in circumstances where she has legally acquired the Camillo property for $320,000 (and associated costs) and continues to hold that property legally and beneficially

The widow used most of the $338,000 that she had received to buy a house for herself and the children to live in.  The court said that Mrs Burgess must account to the children for this and declared that part of funds used to buy the property were impressed with a trust for the benefit of the children.

This decision has profound ramifications for anyone practising in this jurisdiction: if you are the Administrator of an estate and you recieve a death benefit personally from a Super Fund YOU HOLD THOSE FUNDS FOR THE BENEFICIARIES OF THE ESTATE. This will have profound consequences in certain factual situations.  For example in McIntosh, the beneficiaries of the estate were the divorced parents of the deceased (who hated each other). The mother was certain that her deceased son would not have wanted his father to benefit and obtained the payment of the super fund death benefit personally: she had to pay half to the father because of her fiduciary position as administrator of the son's estate.  The position would be similar if funds were paid to the second (or later) wife of the deceased and the deceased had children from a previous marriage.

The usual accoutrements apply: make a will, have a clause in the will that excuses the executor from any conflict of interest arising from receiving a death benefit personally and/or make a binding death benefit nomination.

About the Author

Reg Biddulph

Graduated in law from the University of Western Australia in 1987. He has been a partner at Biddulph & Turley since 1991. He is a member of the Society of Trusts and Estate practitioners and is professionally experienced in all areas of deceased estates. In September 2016 Reg was recognised ...

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