Legal Tip 331: Intestacy Laws and Superannuation on Death

Discussion in 'Superannuation, SMSF & Personal Insurance' started by Terry_w, 17th Feb, 2021.

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  1. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    A person’s will cannot direct what the trustee of a superfund does with a persons superannuation benefits upon their death. But there is a chance the super could end up in the estate as the estate is where the super will often be paid. Therefore, superannuation should be considered inside the will. Often a separate superannuation proceeds trust would be used for this.


    But where there is no will super can still end up being passed into the estate and the intestacy laws will determine who ends up with the super benefits. This is especially so where the deceased person has no dependants. The trustee of the fund will have no other possible way to pay it out.


    Example

    Barney has no spouse, no children and no dependants. He also has no will – ‘what is the point!’ he says on the way to the hospital.

    Barney dies with no assets. But he did have $50,000 in super, which came during the 5 years he was sober enough to work.

    The superfund trustee will have no choice but to pay this to Barney’s estate.

    If will then pass via the intestacy laws – could be to his parents if still alive or to brothers and sisters.


    But this can happen too even where there are dependants.


    Example 2

    Ned has 2 spouses. He has a girl in 2 separate cities and they don’t know about each other – or they didn’t until Ned died when caught with a third woman with her husband murdering him.

    Ned has $500,000 in super and the trustee has to decide who gets his benefits. He has no kids but 2 defacto spouses so the trustee doesn’t want to make a difficult decision and decides to pay his estate.

    NSW law, which applies in this instance, has contemplated a person having 2 or more spouses so under the intestacy laws they both have to share the super death benefits (like they shared Ned).
     
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  2. JohnPropChat

    JohnPropChat Well-Known Member

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    As much as I enjoy your tips, the background stories are sometimes more entertaining.
     
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  3. datto

    datto Well-Known Member

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    Yeah. The multiple spouses scenario got me focussed.