Case Study – Binding Death Benefit Nominations and Avoiding a Family Feud


This case study highlights the value of Binding Death Benefit Nominations and what can happen if they are not implemented…


At a glance

Provided by: Townsends Business & Corporate Lawyers
Topics covered: superannuation death benefit distribution, binding death benefit nominations, trustee responsibilities


In detail

Townsends Special Counsel - Estate Planning & Superannuation, Brian Hor
Townsends Special Counsel – Estate Planning & Superannuation, Brian Hor

The value of binding death benefit nominations comes into sharp relief in this life insurance claim case study involving a sibling dispute over their father’s superannuation death benefit.

The case study, released by Townsends Business & Corporate Lawyers, reports on a court case verdict last month where it says a family feud could have been avoided.

Townsend’s Special Counsel – Estate Planning & Superannuation, Brian Hor, said what he refers to as a classic ‘Super Family Feud’ case, where three children were in a dispute over their father’s super death benefit, could all have been avoided with a valid binding death benefit nomination. Mr Hor takes up the commentary:

In Stock (as Executor of the Will of Mandie, Deceased) v N.M. Superannuation Proprietary Limited [2015] FCA 612, the deceased was a member of a public offer superfund. He was survived by his three adult children. As such, each of the children qualified as being a “dependant” under the terms of the trust deed for the superfund. The trust deed for the fund also allowed for the making of a BDBN [binding death benefit nomination], but the deceased had not done so.

The trustee of the fund decided to pay each of the adult children a third of the death benefits payable from the fund. However, one of the three children, his daughter, who was one of the executors of her father’s estate, sought to challenge this decision on the basis that the trustee should have instead paid all the death benefits to the legal personal representatives of her father’s estate. Under the father’s Will, the daughter would have received the bulk of the death benefits, with none of it going to her two brothers.

There was also evidence presented that the father had previously provided for his sons under a settlement agreement, and therefore presumably he intended that his daughter should be the main beneficiary of his super.

However, the trustee submitted that normally it would not pay a death benefit to the estate unless there are no dependants, or if there were such a direction in a binding death benefit nomination. Therefore the trustee was simply following its usual procedure in making its decision.

In the end, both the Superannuation Complaints Tribunal at first instance and the Federal Court of Australia on appeal held that the decision reached by the Trustee was fair and reasonable in the circumstances.

Mr Hor noted what he said was an expensive legal fight between siblings could have been avoided if the father had made a valid binding death benefit nomination regarding his wishes. He added, “An even better strategy might have been for the father to actually roll out his super into a single member SMSF with a corporate trustee where he was sole director and shareholder, and making a non-lapsing BDBN to his estate, so that on his death his daughter and her co-executors would take control over the corporate trustee to make sure the super death benefits went to his estate.”