Superannuation: Your binding death benefit nomination

Ensure that after your death your superannuation is paid to who you want

What is a Binding Death Benefit Nomination?

A binding death benefit nomination is a direction you sign to the trustee that sets out the beneficiaries who you want to receive your superannuation benefits upon your death.

First, a story to tell. Paul and Greta were in their late 30s with 3 young children and had a lovely home on Sydney’s North Shore. Paul’s high income as an account executive for a large company adequately covered the substantial mortgage payments. Greta was a full time mother.

Tragedy struck when suddenly, Paul died of a brain haemorrhage. His superannuation amounted to around $500,000. Greta thought that as the sole beneficiary of Paul’s Will she would also receive all his super.

Imagine the shock when Greta was informed by the trustee of Paul’s super fund that as Paul had not signed a nomination, the superannuation benefit would not be paid to Greta but would be held in trust for the children. So far as the super was concerned, Paul’s Will, though valid, was irrelevant.

Faced with a huge mortgage to pay, Greta felt compelled to take legal proceedings against the trustee.

The Importance of a Binding Death Benefit Nomination

Unless your super fund is holding a valid nomination, when you die, the fund has discretion as to whom your super benefit is to be paid. As in the story above, the trustee’s decision may not always result in a distribution to who you expected.

By nominating who should receive your benefit, you will avoid the predicament that confronted Greta. A binding death benefit nomination removes the uncertainty about who receives your super and helps you manage your estate planning process more precisely and effectively.

By having a binding death benefit nomination in place, costly and time-consuming proceedings by dependants making competing claims on your super benefit, can be avoided.

Who can I nominate?

For a binding nomination to be valid the nominated beneficiary must be:

  • Your current spouse / partner
  • Your children of any age (including adopted / step children)
  • Anyone financially dependent on you
  • Any interdependent
  • Your executor / administrator – so that the entitlement is paid to your estate

How long does it last?

Typically a binding nomination is valid for three years *. Your super fund should advise you when your nomination is about to expire. You may cancel your nomination at any time.

How do I make a binding nomination?

Signature is similar to executing a Will. You need two witnesses who are not beneficiaries, aged 18 or over. The form must specify the nominated beneficiaries and their respective proportions for payment. Download the form from your fund’s website.

You need to ensure that you have considered the needs of all your dependents when it comes to distributing your assets.

Superannuation and my Will

Greta was unaware that Paul’s estate and his super would be treated differently. Unfortunately as Paul had not signed a nomination the trustee’s discretion was paramount.

In preparation for your conference with one of the Best Practice Lawyers regarding your estate planning arrangements do ensure that you have a current binding death benefit nomination.

Contact a Best Practice Lawyer today to seek assistance with your estate planning arrangements

* A super fund may have its own rules regarding the duration of the Nomination

Wills are the full and final wishes of a deceased – or are they?

Many people assume that if a deceased had a will then there is nothing that can be done to challenge the will or amend who may receive a benefit from the deceased’s estate. However, this isn’t quite true.

There are two main issues that can be explored when assessing whether the deceased’s will is the final word on their estate.

Challenging the will on a technical ground

A will can be challenged on a number of grounds including but not limited to fraud, lack of capacity on behalf of the will maker, undue influence, forgery or lack of the will maker having knowledge and approval of what is contained in the Will.

However, in order to have an ability to challenge the will on such grounds a person must show that they have an “Interest” in the deceased estate. That means you must have either an entitlement in a previous Will or an entitlement on Intestacy (if there is no Will) and you are entitled to a share of the deceased estate by way of your State Legislation.

Being left out of a will or not receiving a full entitlement under a will

If you are an eligible person you have the right to contest the will and make what is called a family provision claim. Eligible persons include:

  • a person who was the wife or husband of the deceased at the time of death,
  • a person with whom the deceased was living in a de facto relationship at the time of the death,
  • a child of the deceased,
  • a former wife or husband of the deceased,
  • a person:
    • who was, at any particular time, wholly or partly dependent on the deceased, and
    • who is a grandchild of the deceased or was, at that particular time or at any other time, a member of the household of which the deceased was a member,
  • person with whom the deceased was living in a close personal relationship at the time of the deceased’s death.

However this does not mean that an eligible person will automatically succeed in their claim. Their rights to family provision will involve the consideration of many factors including:

  • their relationship with the deceased;
  • any obligations or responsibilities owed by the deceased to them;
  • the size and content of the estate;
  • their financial circumstances;
  • their age;
  • any disability that they may have;
  • other beneficiary’s rights; and
  • many other factors.

If you think that the will of a loved one who has passed is not the final word on their estate, please contact your Best Practice Lawyer for expert advice.

Who is handling the estate?

You have just heard that Joe has died. Joe may be a long lost relative who may have left you a gift in his will. Joe may owe you money for work you did for him. So, how do I find out what is in his will? Who should I talk to about the monies he owes me?

This is where the Supreme Courts online probate notice search function can assist you. Most estates require a grant of probate or administration from the Supreme Court. This authorises an executor or administrator to collect the deceased’s assets, pay his liabilities and distribute the balance to the beneficiaries. Before an application for probate or administration can be made, the Supreme Court requires a notice to published.

This notice tells you:

  • Who the proposed executor or administrator is
  • How to contact them

You may be entitled by law to a copy of the will.

The online probate notice service opens the door to communication to pursue your enquiries or claim on the estate.

Your Best Practice Lawyer can assist you with making the search; advising on whether you are entitled to a copy of the will and to pursue your claim.

The double tragedy of James Dean

From the moment that he was born, James Dean was the centre of his mother’s life. She lovingly doted on him, and used to say that one day her beautiful son was going to be a great actor.

When James was five, he and his parents moved from Fairmount, Indiana to Los Angeles – his first time in the city where he would make his name world-famous.

James enrolled in school there, and his mother scraped together money for violin and tap-dancing lessons.

When James was just nine years old, his mother started suffering stomach pains, and went to the doctor. X-rays confirmed that she had incurable cancer. A short time later, at just age 29, she died in hospital, with her husband and nine-year-old son by her side.

Following his mother’s death, James travelled back to Fairmount, and when he got there, the debate started as to who should look after him.

His father, who remained in Los Angeles, said that he couldn’t afford it. The only ones offering to take him in were Ortense and Marcus Winslow, his aunt and uncle.

Ortense and Marcus already had a 14-year old daughter – but they had always wanted a son. James became part of the family, and settled into farming life. At school he loved sport and performing in school plays and, outside school, his adoptive father Marcus introduced him to one of his other great passions – motorbikes.

Although he would be an outsider all his life, he basked in his loving family environment. He rarely heard from his father.

At 18, James Dean graduated from high school and left Fairmont. He went back to L.A. to try his luck in the Dream Factory. Starting in radio, he moved to stage where he got larger and larger roles. He picked up some TV work, and managed to survive – though still having to write back to Ortense and Marcus occasionally to ask for money.

Director Elia Kazan was looking for an actor who could portray a troubled adolescent in his next movie. He considered Marlon Brando and Montgomery Clift – but after seeing James Dean on stage, invited him to his office for an interview.

Dean knew this could make his career, and, wanting to impress Kazan, took him for a ride on his motorbike. Kazan hated it, but knew that Dean had the right attitude for the part, and hired him for ‘East of Eden’.

The film didn’t open until he was making his next film, ‘Rebel Without A Cause’. When the studio started receiving fan mail by the sackful, they knew they had a star.

James went straight from ‘Rebel’ to the set of ‘Giant’. During that shoot he met with his friend, and insurance agent, Lew Bracker. He showed him a picture of a car he had just bought – a Porsche 550 Spyder – and told him that he wanted to take out insurance.

Bracker prepared a $100,000 accidental death policy. He asked Jimmy who the beneficiaries should be. James said that he wanted $5,000 to go to Grandma and Grandpa Dean, $10,000 for his cousin Markie’s education, and the rest to go to his adoptive parents, Ortense and Marcus.

“The way it’s distributed has to be written in your will, Jimmy”, Lew explained, “Have you make that out yet?”

“No” replied James, “I’ll do it next week”.

Two weeks later, James Dean was dead, killed when his Porsche collided head-on at high speed, on his way to the racetrack. He was 24 years of age.
His assets at the time of his death included several thousand dollars in the bank, a motorbike, and the insurance money for his crashed Porsche. His biggest asset was the $100,000 insurance policy.

After taxes, the estate was worth $96,438.11.

All the money went to Winton, his father. But Ortense and Winton, who had raised him, and to whom he had made a silent vow to repay by becoming a success, got nothing.
And all because he died without making a will.


Sources:
‘James Dean: Little Boy Lost’ by Joe Hyams with Jay Hyams, Random House & AMP Estate Planning Service ‘The Art of Preserving Wealth’

The story of screen legend James Dean provides a haunting Hollywood reminder of how the law can channel our hard-earned dollars to unintended beneficiaries – if we fail to make a proper will, and keep it updated.

James Dean had the best of intentions when it came to providing for those he loved most. But the best intentions mean little if they’re not followed through with a plan that will put them into action.

Do you have a will? If you do, is it right up to date with the latest law?

Don’t put it off until “next week” – DO IT NOW!

Superannuation claims and disputes

After the family home, superannuation is often the greatest source of a person’s wealth. It surprises many that superannuation is not an asset that normally passes to family members under the terms of a will.

Superannuation is dealt with under the terms of the Trust Deed (legal document) that sets up the superannuation fund and the superannuation legislation. It is the trustee of the fund that determines who will receive the superannuation monies upon your death. The options the trustee has includes paying the monies to your nominated beneficiary. The trustee is not bound to do this if your circumstances have changed unless you have a binding death benefit nomination in place. Usually a trustee will pay the superannuation monies to a dependent because favourable taxation consequences flow from such payments. As a last resort, the trustee may pay the monies to the executor to pass under the terms of the will, or if there is no will, upon intestacy.

If you are not satisfied with the trustee’s determination, most funds will allow for an internal review. If the distribution remains disputed then it is referred to the Superannuation Complaints Tribunal for final determination.

If you require assistance, you should contact a Best Practice Lawyer.

That Will is not right

People make mistakes and sometimes that extends to mistakes being made in a will. Usually the mistake is only found after the will maker has died. If this happens – what can be done about it?

Section 27 of the Succession Act, 2006 may hold the answer. It states:-

27 Court may rectify a will

(1) The Court may make an order to rectify a will to carry out the intentions of the testator, if the Court is satisfied the will does not carry out the testator’s intentions because:
(a) a clerical error was made, or
(b) the will does not give effect to the testator’s instructions.
(2) A person who wishes to make an application for an order under this section must apply to the Court within 12 months after the date of the death of the testator.
(3) However, the Court may, at any time, extend the period of time for making an application specified in subsection (2) if:
(a) the Court considers it necessary, and
(b) the final distribution of the estate has not been made.

Appointing a solicitor as your executor

An executor is appointed in a will to carry out the will maker’s wishes. This will usually involve:

  • Arranging the funeral
  • Identifying & protecting your assets
  • Obtaining a grant of probate
  • Paying your debts & taxes; and
  • Distributing the estate to your nominated beneficiaries

Usually this task is allocated to a spouse, child or friend of the will maker. Most people have no experience in administering an estate and may only be called upon once in their lifetime to do so. Most executors will engage a lawyer to guide them through the process, which involves personal liability if they get it wrong.

When making a will, consideration should be given to appointing a solicitor as your executor. The benefits include:

  • Avoiding the distress that the process could cause to your family or friend
  • Administration of the estate will run quickly and smoothly because a solicitor knows what to do
  • A solicitor is independent
  • It will assist in avoiding conflict amongst family members
  • A solicitor can defend the will against claims on the estate
  • A solicitor is experienced and is less expensive than a trustee company

Your will passes everything you own to your family, dependents, friends or charities. You will have peace of mind that the process is being carried out according to law in a professional and efficient manner. This will ultimately benefit your beneficiaries.

Being an executor

What is an executor?

If you have been named as an executor in someone’s will, it means the deceased wanted you to arrange his/her funeral and to administer his or her estate. Administering the estate will involve identifying, collecting and protecting the assets of the deceased, paying all debts and taxes and distributing the estate to the beneficiaries named in the will.

Your appointment as executor may be the one and only time in your life that you are required to administer an estate. It is usual to engage a solicitor to assist you in the process as you may be personally liable for any mistakes that you make.

For this reason it is not unusual for solicitors to be appointed as executors as they are familiar with what has to be done. They are also familiar with the technical rules for example, as to which share of the estate bears the liability for payment of the deceased’s debts and taxes.

Do executors get paid?

Generally, an executor acts for free unless the will states otherwise. However, an executor may apply to the Supreme Court for commission regardless of what the will says. If the executor is also a beneficiary, then legal advice should be sought as to whether or not you may apply for commission.

An executor is entitled to be reimbursed from the estate for any out of pocket expenses. This includes solicitor’s fees and taxation advice.

Can you get out of being an executor?

Being an executor is a time consuming and thankless task. Executors are expected to personally carry out the deceased’s wishes. It is not unusual for conflict to arise with beneficiaries. An executor may renounce probate if they do not wish to take on the role of executor. A solicitor can help with the appropriate documentation.

Your first steps as executor

As executor, the first thing you’ll need to do is to thoroughly read and understand the will. Then you should make a list of everything the deceased owned as well as any payments or assets they were entitled to. This list is known as an inventory of property.
Common assets included in the inventory of property are:

  • Home
  • Other real estate
  • Car
  • Money
  • Bank accounts
  • Furniture
  • Household appliances
  • Jewellery
  • Shares and other investments
  • Life insurance policies, if payable to the estate
  • Superannuation, if payable to the estate
  • Outstanding work entitlements.

You should ensure that the assets are insured and kept safe.

You will also need to identify all debts and locate the beneficiaries.

It is a good idea to collect or redirect the deceased’s mail. You will usually need to apply to the Supreme Court for a grant of probate.

What is probate?

Probate is a certificate from the Supreme Court notifying the world at large that the attached will is valid and enabling the executor to administer the estate. The document is proof of the executor’s authority to deal with assets of the deceased.

Why is probate necessary?

The deceased’s assets may be held by others, for example, a bank holding the deceased’s funds, a share registry holding the deceased’s shares, and the Land Titles Office regulating the ownership and transfer of the deceased’s real estate. These asset holders may require probate before releasing the assets or transferring them in accordance with the will. The grant of probate confirms that the person seeking release of assets has authority to deal with them and this protects the asset holders against possible liability for handing assets over to the wrong person. This assists with the orderly and lawful succession of estates.

Fees for probate

The Supreme Court charges a sliding scale of fees for lodging an application for probate. The larger the estate, the higher the fee. However, where an estate is valued at less than $100,000 the Court does not charge a fee.

Paying expenses and debts

Once the Supreme Court has granted probate the executor must pay the deceased’s testamentary expenses and debts before they can distribute what is left. Technical rules apply as to the order in which assets are to be applied in payment of these liabilities and legal advice should be sought.
An estate bank account should be opened for collection of the deceased’s moneys as these funds should be kept separate from the executor’s personal assets.

Preparing a distribution report

Once an executor has sold the deceased’s assets and paid all of the debts a plan of distribution should be prepared showing all moneys received, all payments made and how the balance is to be distributed. This should be provided to the residuary beneficiaries. Some of the assets may be transferred to beneficiaries in appropriate circumstances.

Distributing the assets

It is usual to publish a notice calling for claims against the estate to be lodged with you. All claims must be finalised or provided for before distributing the estate.
It is usual to obtain a receipt from the beneficiaries to acknowledge that they have received their proper entitlement under the will.

How your solicitor can help you

Your solicitor can guide you through every stage of your journey as executor, including:

  • Informing you of your rights and responsibilities.
  • Helping you apply for Probate and complete the Probate forms.
  • Helping you identify and collect the deceased’s assets.
  • Advising you on any potential tax implications.
  • Advising you on the right order to pay debts and distribute assets.
  • Assisting you to resolve any claims against the estate.
  • Helping you draw up a statement of assets and distribution report

Rights of beneficiaries

Beneficiaries should obtain independent legal advice concerning their rights and entitlements in a deceased estate. The estate’s solicitor acts for the executor and not for the beneficiaries. The estate’s solicitor cannot provide beneficiaries with advice due to a conflict of interest.

Beneficiaries are entitled to a copy of the will. Sometimes, beneficiaries require the assistance of a solicitor to enforce that right.

Beneficiaries are also entitled to be kept informed about the administration of the estate. This is typically where problems arise and beneficiaries see the need to engage a solicitor. All too often the executor neglects or refuses to talk to the beneficiaries about what is in the estate, what is being done and when distributions can be made. Beneficiaries may also require advice concerning debts owed to or from the estate.

Best Practice Lawyers are often engaged by beneficiaries to find out what is going on and to protect their rights. If an executor refuses to fulfil his or her obligations, then it may be necessary to have them removed from office. After all, executors are accountable to beneficiaries who have a right to ensure the proper administration of the estate.

Who is considered eligible to make a family provision claim as a de facto?

Was the claimant the “de facto” of the deceased and accordingly an “eligible person” for the purpose of making a claim for a family provision order under the Succession Act?

The Property (Relationships) Act 1984 NSW defines a de facto relationship as two persons who live together as a couple though not married to one another.

In determining whether two persons are in a de facto relationship the Court must take into account all the circumstances of the relationship including the length and permanence of the relationship, the degree of emotional and financial support and the residential arrangements.

The Court has determined that is not necessary for the two persons to be physically cohabitating as long there is a genuine domestic arrangement which is not accidental or contrived.

Accordingly in Weston V Public Trustee (1986) NSW the Court found that a woman who had been living with the deceased for several days every week for over thirty (30) years and had at the same time kept a separate residence was an eligible person.