NSW Nominations for Super Fund Lapsed - What Next?

[snoop]

Hi

I am an executor of will for an estate where the Superannuation and Death Benefit are creating issues. The deceased detailed the following in their will:

20% of the estate to 1 party

80% of the estate to a 2nd party

They also completed a binding nomination. The nominations were the same – 20% to one, and 80% to another.

Initially, I thought OK, nice and easy. Both fill out the forms and bang, we are done. No need for Probate as the funds are not huge, and the Fund told me Probate was not needed.

The Super Fund have now told me the nominations have lapsed. They then asked if both parties were dependents. One of them is not. They have said this party would then need to still fill out the form, but if they wanted to claim any funds they would need to prove they were financially dependent.

The affected party are now up in arms and stalling things. They are claiming the Deceased was not aware of the lapse ( I think they were and had second thoughts to be honest…) and that per the will the intention was that they were to receive a percentage. They have also said the since the nominations have lapsed the Fund has to pay the estate so that the distribution can occur per the will.

Any ideas on what the Super Fund will do? I’m keen to lodge probate for the estate but am loathe to do anything until I know which way the Super Fund will go, as I believe if they do decide to pay the estate then I will need to include the Super in Probate. I have had a quick look at the Funds website and they detailed the following:

In the event of your death, your account balance, plus any insurance benefit paid by the insurer, must be paid to your dependants, your estate, or a combination of both.

Does this mean they will pay the deceased estate? Or could they potentially take the position of paying per the will?

Also what can I do if the non-beneficiary party does not submit their form? Is there anyway I can push for an alternate action to be taken by the Fund?

 

[Victoria S]

If your nomination expires and is not renewed, your benefits are usually paid to your estate.

 

[snoop]

Thanks, they have come back to me saying they will not do this... but they have messed me around a few times now so I'm just going to have to hold tight and see what they do.

In terms of the submission of the form, is there anyway I can force this issue? The Super Fund told them they need to fill out the form and state that they were not financially dependent and do not want to claim. They have also said if they do want to claim they have to prove they were financially dependent.

Such a mess! I can see why the Funds have clear rules about who is a dependent.

 

[Smiley]

Hi Snoop,

Please clarify the below questions before I can make further comment.

What is their relationship to the late member at the time of passing? Was anyone of them living with the late member at the time of passing if yes, how long?

PS - There is a definition of dependant, click the below link and scroll down to dependant

SUPERANNUATION INDUSTRY (SUPERVISION) ACT 1993 - SECT 10Definitions

On a warm note, you say dependent, but I think you mean dependant? These two words though similar in pronunciation and spelling are different altogether.

Dependent is like financial dependency.

Dependant is like child or spouse etc

Cheers

 

[snoop]

Hi Smiley

I did spell it wrong. The beneficiaries are Child ( Adult and not financially dependent ) and current spouse of which they have children.

 

[Smiley]

Hi Snoop,

In that case, all parties are parties to whom the benefit can be paid to.

You say the spouse has children. These children could also be paid the benefit as they would be deemed children (whether biological or step) and children are considered dependants.

You say the adult child has not completed any paperwork for the Trustee. He is not obligated to and the Trustee can only form a decision based on the material before it.

Based on the snippet of information provided, I am going to take an educated guess and say the Trustee's decision will be 100% to the spouse, or depending on the age of the spouse's children, if minor, the majority to the spouse and a percentage to the children in trust (likely in trust to the spouse).

If this is the decision made, the adult child may object. If an objection is made, unless documentation is provided to alter the Trustee's decision, the decision will be maintained.

If the decision is maintained, perhaps, depending on the strength of the relationship between the adult child and the spouse, they may form their own written Agreement that the spouse upon receipt of X amount, will transfer X amount to the adult child.

Note, if this was done, it could be that the adult child would avoid tax. If the Trustee paid a portion of the benefit to the adult child as a non financial dependent, his portion would be taxed (can't recall tax rate off the top of my head, but perhaps 30-40%??). An Agreement may avoid tax and avoid any unnecessary delay and animosity between parties.

 

[snoop]

Hi

Just heard back from the SuperFund. They have confirmed:

1.Probate not required
2.They have received all forms required
3.They have lodged a claim for the Insurance component

Once the Insurance comes back they have said they will submit the claim to the Trustee for approval. Finally things have started moving.....

They have also confirmed they will be processing an anti-detriment component...From what I can see this is an amount which represents the tax paid by the member during their lifetime. The Super account only has a balance of around 100k.

The Deceased opened the account in 1994 and stopped working due to terminal illness in 2010. They did roll another Super account into this fund at some stage as well. Any idea how I can calculate what this additional payment will be?

 

[Smiley]

I'm glad to hear.

Here is a quick calculator to assist with anti detriment calculation
Anti-detriment calculator

It is also good to hear the Trustee provides anti detriment which as you say, is essentially a tax refund and will be of some additional benefit to beneficiaries.

As a side, not all Trustee's pay anti detriment and the Gov't has announced that it will no longer allow anti detriment on payment on superannuation death benefits that will come into play next year or soon after? In other words, the Gov't gets to keep its greedy hands on additional tax.

 

[snoop]

Thanks for all your help!

 

[bella joe]

Hey, Thanks for that. (jhsdsh.com)