Superannuation & Estate Planning: Be Sure To Get It Right

Experience shows many clients have more and more of their wealth held within the superannuation environment, typically in a self-managed superannuation fund. It is imperative to get the planning and documentation correct, not only to maximise and maintain the tax concessions for as long as possible but to ensure that on death, the money passes as intended.

Three recent Supreme Court decisions (one in WA) highlight the truth of the old adage of “if it can go wrong, it will”, this time in the superannuation environment. In each instance, the amounts in question were significant and problems arose such that the resolution was found in Supreme Court litigation.

In two of the disputes, the fund came to be controlled by a party to whom the deceased member did not intend to have the money. In the first, the documentation and arrangements were not put in place properly, and even though the deceased’s will was clear, the deceased member’s wishes were thwarted.

In the second, whilst the documentation was done correctly and the person who was intended to receive the benefits was successful before the Court, because the wrong person came to control the fund, the matter did not proceed as anticipated, and was only resolved by litigation.

In the third matter, no indication was left as to what was intended. Importantly, there was no will in place. One of the potential recipients “got in first” and was paid all the benefits. The recipient however was held to have a conflict of interest, and having preferred her own interests and ignored other potential recipients, was ordered to deliver up all of the money received.

While two of the cases involved blended families and the third involved an estranged couple, the lessons to be learnt are;

  1. understand what could happen on death, and who will control the fund and be in a position to make decisions; and
  2. decide if anything needs to be done so that the right people will make the decisions, and whether to remove any discretion by mandating how the benefits are to be paid.
    Simply leaving it to be dealt with by the executors or administrators, even by inserting a clause in the will, has a far greater risk of problems than may be imagined.

Unfortunately, as illustrated by the three Supreme Court actions, resolving matters later is stressful, time consuming and expensive. It may have taken very little time and effort to get it right beforehand.

Superannuation must be dealt with carefully and properly as part of the estate planning process.

Ron Doig (Director)