According to Margaret Arthur, a special counsel with HopgoodGanim Lawyers, the two main causes are issues of compliance with the terms of the super fund’s trust deed and cognitive capacity at the time the nomination was made.
On the former, she shared a recent Queensland decision to demonstrate the importance of strictly following the terms of the trust when making a superannuation nomination in relation to an SMSF.
“In a recent Queensland decision, the binding nomination had been made by a husband leaving 50 per cent of his self-managed super balance to his second wife. A son from the deceased’s first marriage challenged the nomination, arguing that it didn’t comply with the terms of the trust deed,” Arthur explained.
“The son was successful. The reason for the success was that, although the nomination had been filled out in compliance with the requirements of the trust deed, the husband hadn’t given notice of the nomination to a second trustee of the trust.”
A failure to give notice formally to the second trustee led to a conclusion that the nomination had not been made in compliance with the terms of the trust, she said.
On the issue of cognitive capacity, Arthur elaborates on a recent NSW case when a man was in the hospital and on morphine at the time the nomination was made in relation to his $4 million death benefit.
She observed: “The argument is over whether the deceased knew what he was doing when he signed the nomination. Although the outcome of the case remains to be seen, it is sure to attract a lot of attention because the level of cognitive capacity to make a nomination is currently unclear.”
Capacity, and whether the deceased knew what they were doing when they made their nomination, has also arisen in a number of disputes over retail funds.
There are already numerous decisions of the Superannuation Complaints Tribunal and AFCA where capacity has been either the main cause of the dispute, or a factor in the dispute, Arthur added.
Recent figures on AFCA’s virtual dashboard Datacube, which currently offers data covering firms with four or more complaints in the six months to 31 December 2022, found some 10.3 per cent of superannuation-related complaints received during that time period were regarding death benefits distribution.
It was the third-highest category of superannuation complaints, behind account administration (59.5 per cent) and group life insurance (27.7 per cent).
