Death benefit payments flagged as key technical issue for 2022

"In the past few months, we've been starting to see a lot more death benefit payments come out of funds [from] clients we've had for 20 to 25 years and I suspect this will come up more and more," said Mr Colley.

"We're starting to see them pass away and the kids want to get death benefits out or [we need] to help the surviving spouse understand what they can do with the benefits and that's an area we've done a fair bit of work on this year."

Mr Colley said he tends to see a lot of issues arise with single member funds in particular when it comes to death benefit payments.

"We're seeing instances where there's a single member fund and there's a second trustee in place but they've picked one of their friends as the second trustee and that person is of a similar age and in some cases both of them have died," he explained.

In an article from earlier this year, Mr Colley cautioned that where trustees simultaneously pass away, there can be challenges with how the death benefit strategy is dealt with.

Including a survivor provision in the binding death benefit nomination, he said, can help resolve issues where the parties die simultaneously and the member’s wishes for the direction of the benefit would differ if their spouse had predeceased them. 

“This may occur where a blended relationship is in existence and the member may wish their death benefits to be paid to their children or their estate rather than to their spouse’s children via the spouse’s estate," he explained. 

“The member may also wish to put in place a cascading death benefit nomination, which would nominate the surviving spouse as the first death benefit beneficiary, but if the surviving spouse died within 30 days of the member’s death that their children or others become entitled to receive the death benefit."