Conflicts, estates and superannuation
What is the responsibility of a trustee to the beneficiaries of an estate when there is a dispute about where the superannuation entitlements of the deceased should be paid?
For many people, their largest asset is now their superannuation. Under the law, on the death of the deceased, the superannuation fund can either pay the money they hold to the legal personal representative of the deceased (their executor or administrator) who will then disburse the money in accordance with the will or, if the deceased died without a will, their beneficiaries under the law. Alternatively, the superannuation fund can pay the money directly to the deceased’s spouse, children, a dependent or someone who was in an interdependent relationship with the deceased. The decision on where to pay this money is totally at the discretion of the superannuation fund. The only exception is where the deceased has given the fund a current binding nomination. Merely advising the fund who you want to receive your money is not enough to bind the fund.
In a recent case, the deceased died intestate (without a will), and the only beneficiaries were his parents. Either of them could have applied to be the administrator of the estate, but the mother applied. The parents were equally entitled to his estate as beneficiaries. He had a large amount of superannuation ($453,000.00), and the mother applied in her personal capacity for the money and the money was paid to her. As a result this money was never part of the estate, and the father received none of it.
The father sued her in her capacity as the administrator of the estate, on the basis that the law imposed a positive duty on the administrator or trustee of the estate to maximize the money to the estate and she should have claimed the superannuation money for the estate and not herself.
The court agreed with the father but not with his reasoning. They agreed that an administrator had a general duty like all people in a position of trust, not enter into transactions in conflict with that duty. Her duty as a administrator was in conflict with her personal claim for the superannuation money. This meant that the mother had to account to the estate for the money she received and she ended up only receiving half of the original amount and the father as the other beneficiary the other half. The court however distinguished between the role of administrator and the role of executor under a will. The Court found, that where there is a will, the deceased would be aware of potential conflict between the Executor and themselves on a personal level, but consented to that conflict, so the courts reasoning in relation to the duties of an administrator would not apply in that situation.
The implication of this decision is that the obligations of the administrator of an estate where the administrator is also a potential claimant of the superannuation money is different from that of an executor in the same situation. If the deceased had left a will that appointed his mother as executor she would have succeeded in keeping the whole of the money and would not have to share it. However as an administrator of an estate, she must apply for the money on behalf of the estate, because she cannot prefer her personal position as a claimant over her obligations as administrator.
If you have any queries regarding superannuation entitlements and estate planning please contact Kristy Collins, Associate in McLaughlins Lawyers’ Commercial and Wills and Estates team.