Husband Gets Wife’s Superannuation, Despite Her Leaving This To Her Children In The Will
Author – Graeme Heckenberg
A recent Court case of highlights the special issues involved in estate planning where superannuation, and in particular a Self-Managed Superannuation Fund (SMSF), is involved. In this case, a wife died whose Will directed her superannuation to be paid to her children. She will specifically state that she did not want any of her superannuation to be paid to her husband. However, on her death, her husband assumed control of the SMSF and caused her entire superannuation benefit to be paid to him. The deceased’s children contested the will and disputed the Trustee decision to not to pay the pay the superannuation benefit to them
Francesca and Augusto Conti were the only trustees and members of an SMSF known as the Conti Superannuation Fund (Fund).
In August 2010, Francesca died. She had a valid Will which left her superannuation benefit of approx. $650,000 to her children. Her will specifically stated that she did not want any of her superannuation entitlement to be paid to her husband, Augusto.
After Francesca’s death, her husband retired as trustee of the Fund and appointed a corporate trustee, which he controlled, as trustee of the SMSF (Trustee). Appointing a corporate trustee enabled the Fund to satisfy the requirements of a single-member SMSF under the Act.This meant that there was no need to appoint any other persons as trustees or members of the Fund.
At the time of her death, Francesca did not have a valid death benefit nomination in place. The Trustee exercised its discretion and determined to pay the deceased’s entire superannuation entitlement to her husband.
The Court Case
The children contested the will and brought an action against the husband and the Trustee in the Supreme Court of Western Australia in Ioppolo & Hesford v Conti. The children argued that, as executors of the estate, they were entitled to be appointed as co-trustees of the Fund. In so, the children would have had some power to influence the decision in relation to the payment of their mother’s superannuation benefit. The court found that, while the law allows an executor to be appointed as a co-trustee of an SMSF, it does not require that such an appointment be made.
The deceased’s failure to correctly document her wishes resulted in a substantial financial loss to her children, as well as a financially and emotionally costly family dispute. Superannuation is not an ‘estate asset’: that is, it can only be dealt with in your Will if the superannuation trustee pays your death benefit to your estate. The trustee may be bound to do this, or may choose to do this. In order to direct the trustee it is best to have in place a binding death benefit nomination or death benefit agreement.