An industry lawyer has highlighted a recent Supreme Court case which has “critical implications” for SMSF practitioners.
The judgement of the McIntosh v McIntosh case, which DBA Laywers has described as a “first of its kind”, was handed down by the Supreme Court of Queensland this month.
James McIntosh, son of Elizabeth and John, died in July 2013 without a surviving spouse or children and without a valid will. Elizabeth and John are divorced.
Elizabeth was appointed administrator of James’ estate. She stated in an affidavit that she understood her obligation to collect her son’s assets and distribute his estate by dividing them equally between herself and John.
Elizabeth then applied to James’ super funds to have his super death benefits paid to her personally, describing the interdependency relationship between her and James. Each super fund agreed to do so.
Therefore, it appeared that all of James’s super would be paid directly to Elizabeth. John would receive only half of the estate.
John’s lawyer wrote to Elizabeth, stating she had a “fiduciary obligation” to maximise the return for the estate.
The matter went to court and Elizabeth was required to hand over the super benefits to the estate.
“The trustees of three large super funds determined to pay super death benefits to a deceased’s interdependent mother, yet the mother was ordered to then pay that money to the estate so that a significant portion could be paid to the father,” DBA Lawyers stated.
“This outcome is more surprising as the mother appears to have been the nominated beneficiary in respect of each of the super funds, albeit it via non-binding nominations in each case.”
DBA Lawyers stated there are additional facts that could have changed the outcome of the case.
“Firstly, if a binding death benefit nomination had existed in favour of the mother personally, then this matter almost certainly would not have arisen.
“Secondly, if James had made a will naming the mother as the executrix then there is strong indication the outcome would have been different.”
DBA Lawyers said while this case didn’t involve SMSFs, there are “critical implications” for SMSF practitioners.
“Firstly, this case serves as an important reminder of how strict the fiduciary duties are that apply to legal personal representatives and others,” DBA Lawyers stated.
“Secondly, it illustrates that even if the personal estate is relatively small, a will is still important. Again, if James had made a will and appointed the mother as his executrix, it appears that there is a fair chance that the court would have decided differently.
“Thirdly, it raises important questions about binding death benefit nominations. Had a valid binding death benefit nomination been in place in favour of the mother, this case probably would not have arisen.”
Speaking to SMSF Adviser, DBA Lawyers director Bryce Figot said this case also serves as a reminder that it is “critical” that the right people are controlling the super fund upon death.
SUBSCRIBE TO THE SMSF ADVISER BULLETIN
23 Jun 2016Trustees reminded of ‘positive’ CGT news as EOFY loomsBy Katarina Taurian
22 Jun 2017Westpac veteran and SMSF exec set to departBy Staff Reporter
22 Jun 2017ATO sets compliance targets for auditors in 2017-18By Miranda Brownlee
22 Jun 2017CGT relief still plaguing trustees, says former ATO execBy Miranda Brownlee
22 Jun 2017Consultancy firm predicts low take-up of SMSF robo-adviceBy Miranda Brownlee
21 Jun 2017SMSFs warned on timing traps with unit trust transfersBy Miranda Brownlee
- view all
Trustees reminded of ‘positive’ CGT news as EOFY looms
A capital gains tax (CGT) issue that was causing confusion in the industry has been cleared up by the ATO, and professionals are being remin...read more
ATO sets compliance targets for auditors in 2017-18
The ATO will extend its focus on auditor independence in the next financial year, examining the referral sources of audits, and will also sc...read more
CGT relief still plaguing trustees, says former ATO exec
SMSF trustees continue to be under a number of misconceptions in relation to CGT relief in terms of what assets are eligible for the relief ...read more
- view all