Legal Tip 301: When Not to Have your Super Paid to the Estate on Death

When a person dies their super benefits must be paid out and this payment can only go to Dependants as defined under the SIS Act (spouse, children mainly) or to the estate. The estate is a popular option as the super can then pass via their will (or intestacy laws if no will).

But it has some risks with this such as:


A) Family Provision Claims

Where an eligible person thinks they have not been provided with adequate provision they can apply to the courts to vary the will/intestacy laws so they can get more. If super flows into the estate, it could therefore be at risk of falling into the wrong hands.

(not that super could also still be attacked where it doesn’t pass to the estate)


B) Bankrupt Estates

Some estates become insolvent. The debts of the estate can exceed what the estate is worth. Paying the super into the estate in these situations can mean it will be lost to creditors.


Seek legal advice before making binding death benefit nominations and discuss the possibility of either of those events happening.

 

c) spendthrift or risky beneficiaries. The will may need to provide for testatmentary benefits ?

I have seen wills in the past where these were (badly) drafted by the deceased. They had concerns for a entitlement flowing to their adult kids eg adult kids #1 is bankrupt. So they didnt make them entitled and instead made their spouse entitled. Another one I saw the adult kids was a spendthrift (gambling) and so they made the grandkids entitled to skip their adult child. He then sought a claim on the estate.

I am increasingly concerned about binding nominations which lapse or are plainly defective (eg nominate a close friend) too. More ends up in the estate and if the estate doesnt provide correctly....a mess.