‘First of its kind’ judgement handed down
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.