Recent super fund benefit decision a lesson for SMSFs

“The superannuation decided to pay everything to the partner instead of the deceased member’s parents,” Mr Siegmann told SMSF Adviser.

This was successfully disputed by the parents of the deceased member and the trustee of the fund reversed its decision and decided to pay to the estate.

Mr Siegmann said while this was a decision by a large APRA fund where members are subject to lapsing binding death nominations, SMSFs are still subject to the same SIS Act provisions that define a relationship, dependency relationship or interdependency relationship.

“The SIS Act provisions on interdependency relationships are soft compared to the requirements to challenge in an estate, so you’re able to trigger them in circumstances that may be unfair,” he said.

“It’s easy after someone’s died or someone’s died and we’ve got an estate, and we’ve got competing interests to work out what feels fair at that point, but trying to anticipate what might be fair in the circumstances before anything has gone wrong is what this is about and that’s so much harder.”

Mr Siegmann said the matter showed the importance of SMSFs implementing an effective binding death benefit nomination.

“If they had had an active binding death nomination, almost all of the problems in this situation would have been avoided. The member could have nominated his estate and there would not have been an issue,” he said.

“The lower threshold requirements for claiming super compared to contesting an estate mean you can hit the thresholds to challenge a deceased members super balance much easier than you can hit the thresholds required to challenge the provisions of the will of a deceased person. That’s where there’s the disconnect currently.”