Usually your superannuation will be excluded from your estate. However, in New South Wales, the Court can declare that your superannuation forms part of your estate in certain circumstances.
Recently, the New South Wales Supreme Court considered whether a wealthy man’s Will made adequate provisions for his adult children.
The man’s children attended private schools and received a university education. Some of the children were gifted properties by the man while he was alive. He married a second time after his first wife died. The man’s relationship with his children became strained. He threatened to disinherit them.
The man was a member of a self-managed superannuation fund, which was valued at about $12 million. He signed a binding death nomination in favour of his second wife. The nomination form included words saying that the nomination could be revoked at any time.
The man owned several properties, some jointly, and shares in listed companies. Three months after his marriage to his second wife, the man signed a Will which left a property, money in a bank account and all shares he owned to his second wife. Ownership of the jointly owned properties automatically passed to the second wife upon the man’s death. The rest of his estate was to be divided equally between his children. After the specific gifts to his second wife and payment of estate expenses, there was very little left to distribute between the man’s children.
Three of the children commenced proceedings in Court seeking a provision from the man’s estate. They argued that the man’s Will did not leave them with an adequate amount for their maintenance and advancement in life.
The Court had to decide whether the children were left with an adequate provision. If they were not left with an adequate provision, should the man’s excluded property and superannuation be made part of the man’s estate and be available to distribute to his children? Property excluded from an estate can only be made part of an estate if the actual estate is insufficient to make a family provision order.
The man’s children argued that by not revoking the binding death nomination, the man deliberately reduced his estate to limit the provision that would be made for the children. The man could have signed a new nomination before his death that would result in the superannuation being paid to the man’s estate, but he did not.
The Judge decided that it is not the Court’s function to achieve equality between the children or to correct a sense of wrong felt by them. The Court’s function is to decide what is an adequate provision for the advancement in life and maintenance of the adult children.
The Judge accepted the children’s argument that the failure to revoke the binding death nomination in favour of his second wife was intended to limit the amount available to the man’s children. Up until the man’s death, he could have revoked the nomination in favour of his second wife and made a new nomination in favour of his estate so that the superannuation formed part of his actual estate and be available to distribute between his children. The Judge decided:
- The superannuation proceeds and the properties should form part of the man’s estate.
- The children were not left with an adequate provision by the
- The children were given further provisions totalling $2.7 million. The superannuation proceeds and the properties could be used to pay the provisions.
