BDBN & the Superannuation Trustee

The purpose of a superannuation death benefit is to provide for the deceased member’s dependants who had a reasonable expectation that they would continue to receive financial support from the deceased, had they not died.

In a recent case, the deceased had not made a superannuation binding death benefit nomination (”BDBN”) directing the trustee of the fund to pay the death benefit to a nominated beneficiary.

The deceased had made a will the day before he went missing. A coronial inquest found that the deceased committed suicide by drowning. He was survived by his estranged wife and two adult children.

When a member dies not having made a BDBN the death benefit distribution is governed by the superannuation trust deed and the law. In this case the trust deed specified that in the absence of a BDBN (or an approved non-lapsing death benefit form) the trustee must pay the benefit to one or more of the deceased member‟s dependants and/or his legal personal representative in whatever proportion it decides.

The trustee considered that the estranged wife was not financially dependent upon the deceased at his death. However, as the adult children were named beneficiaries under the member’s will the trustee determined that the death benefit should be paid to them in equal shares.

The estranged wife made a complaint to the Australian Financial Complaints Authority (AFCA) that as the separated spouse who was financially dependent upon the deceased she expected to receive a financial benefit from her husband; submitting she should receive the entire benefit.

AFCA set aside the trustees decision on the grounds it was not fair and reasonable in the circumstances. Although the deceased and his wife had been separated for 19 months – following 28 years of marriage – they had not entered into a financial settlement before his death.

As a corollary, the adult children were not financially dependent on the deceased at his death, and as the Will did not refer specifically to superannuation should not be treated more favourably than the wife.

AFCA set aside the trustee’s decision and substituted payment of 50 per cent for the wife with 25 per cent to each child.

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