Where Is Your Super Really Going?

Under Superannuation law the governing rules of a superannuation fund may permit a member to give a notice to the trustee of the fund requiring the members benefits to be paid on his or her death to the legal personal representative (i.e. his or her estate) or dependents (a binding Death Benefit Nomination or BDBN).

The trustee is bound to follow this nomination if it is given in the correct form. Other than the case of an effective Binding Death Benefit Nomination, the trustee has a discretionary power in relation to distributing a deceased member’s benefits. 

In the absence of a valid Binding Death Benefit Nomination, courts will not enforce a deceased’s clear wishes expressed in a Will with respect to the Will maker’s superannuation if the correct technicalities are not implemented [Ioppolo v Conti (2015) WASCA 45].

In her Will, Mrs. Conti left her interest in the Self Managed Super Fund (SMSF) she had with her husband (Mr Conti) to the children of her first marriage and specifically stated that she did not want any of her superannuation entitlements paid to Mr Conti.

After Mrs Conti’s death, Mr Conti appointed a corporate trustee of the fund and through that the trustee exercised his discretion to pay the death benefit to himself by way of a pension.

The executors argued in court that Mr Conti had no power to deal with the death benefit and, in doing so, was acting contrary to his fiduciary duties, but their argument failed.

Surviving trustees of SMSFs in respect of which there is no valid BDBN, are therefore entitled to distribute the funds pursuant to their discretion and not obliged to distribute the funds pursuant to the Will, and this is not acting contrary to a fiduciary duty. 

Mrs Conti’s wishes for her interest in the SMSF to go to her children on her death would have come to fruition if she executed a correctly drawn Binding Death Benefit Nomination in favour of her children, as the trustee of the fund would have been legally obliged to follow that nomination.

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