Super under attack in Family Provision Claims
Can the Court claw back your superannuation notwithstanding a binding death nomination under the Succession Act?
Superannuation has traditionally been thought of as lying outside of an estate and therefore outside the grasp of people applying for provision, especially where there is a binding death nomination. However in the recent decision in Benz v Armstrong; Benz v Armstrong; Benz v Armstrong [2022] NSWSC 534 (the Benz Decision), the Court confirmed that superannuation could be brought into an estate under the notional estate provisions of the Succession Act 2006 (NSW) (the Act). The case has implications for estate planning strategies.
The Facts
The key facts were:
the Deceased (Dr William Benz), who died on 5 April 2019, was survived by his 6 children (from his first marriage), his second wife (Erlita) and a step-daughter (from his second marriage);
the relationship between the Deceased and his 6 children had become strained as a result of his relationship with Erlita (which he had had commenced whilst he was still married to their mother);
in his last will dated 13 September 2012 (Will), the Deceased left the residue of his estate to his children;
however the Deceased had structured his affairs and estate so that there would be no residue left in the estate to distribute to his children, including:
signing a Binding Death Nomination (Binding Nomination) on 12 May 2016 (in favour of Erlita) in relation to his superannuation;
holding a number of properties jointly with Erlita; and
in January 2019, transferring shares in NAB and Westpac worth about $1.1 million to Erlita (which she claimed were a Christmas gift from the Deceased);
the Deceased had, during his lifetime, provided properties to some of his 6 children;
after the commencement of proceedings, Erlita transferred $9,282,490 in shares in specie to herself as a death benefit pursuant to the Binding Death Nomination (Superannuation Shares); and
proceedings were commenced by 4 of the Deceased's 6 children seeking further provision from the estate, 3 of which proceeded to final hearing.
Key Issues/Questions for the Court
Notional Estate
In NSW, property can be designated notional estate by the Court where a deceased person either took steps that resulted in property no longer being available to their estate or failed to take steps that were available to them that would have made property available to their estate in the 3 years before their death. This is a peculiarity in NSW and does not appear in the succession legislation in other states. As there was no residue in the Estate, the Court had to consider whether it could tap into the notional estate, a significant portion of which was in superannuation.
Cheese or jam
It was accepted by the parties that none of the Deceased's children were destitute. However, they claimed that their needs could be assessed not only by reference to "the bread and butter of life" but also to "a little of the cheese or jam that a wise and just parent would appreciate should be provided if circumstances permit".
Determination
It still strikes people as odd that a deceased cannot do what they want with their property after death. After all, in a case where the deceased went to such lengths to ensure that his children did not receive any of his estate, why should the Court not uphold his wishes? Because in this case, the Court decided that the children were entitled to some cheese or jam and not just bread and butter!
The Court decided that:
the superannuation formed part of the Deceased's notional estate. In coming to this conclusion the Judge considered:
the failure to revoke a nomination and give a replacement nomination falls within the relevant provisions of the Act;
the Binding Nomination included a term stating that the Deceased could revoke the nomination at any time and give a replacement nomination; and
it was not until the moment of death that the failure to revoke the Binding Nomination took effect;
the 3 children were awarded varying amounts from $900,000 to $1.9 million plus their costs (partially on the indemnity due to the conduct of the defendant); and
the following assets (in the following order) would be designated as notional estate as necessary for the purposes of enabling the executor to meet the orders for provision and costs of the plaintiffs:
the NAB shares previously transferred to Erlita;
the Westpac shares previously transferred to Erlita;
the Superannuation Shares previously transferred to Erlita; and
the property at Pymble (which the Deceased had owned jointly with Erlita).
Lessons to be Learned
In light of this decision, you should carefully consider reviewing your estate planning strategies and not assume that a binding death nomination is beyond attack on your death.
Contact our Private Advisory & Succession Planning Team should you wish to discuss further.
The material in this article was correct at the time of publication and has been prepared for information purposes only. It should not be taken to be specific advice or be used in decision-making. All readers are advised to undertake their own research or to seek professional advice to keep abreast of any reforms and developments in the law. Brown Wright Stein Lawyers excludes all liability relating to relying on the information and ideas contained in this article.
contact
elisa molen-grigull
Graduate Lawyer
E emg@bwslawyers.com.au
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cherrie homer
Special Counsel
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P 02 9394 1076
snezana vojvodic
Partner
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P 02 9394 1074