March 5, 2015
In a recent matter, two children were left behind by their father suddenly and tragically by reason of a terrible motorcycle accident. It was believed by some parts of the family that the accident was suicide, although this wasn’t generally accepted by all.
The children still had their mother, although she was of very limited means, and had separated from the father a relatively short time prior to his death. The father had left the mother for another woman.
Through a new Will, the father left his entire estate to his new girlfriend, leaving the children (who had considerable needs unable to be covered elsewhere) with nothing.
Just before his death, the new girlfriend had violently attacked the father with a knife, and been admitted for psychiatric treatment. Needless to say, they had broken up.
The children were eligible to make a claim for family provision against the estate. However, through this process, it was discovered that the estate was very small, and the new girlfriend had began to have the assets transferred and sold within a matter of days from the date of death. It was already almost uncommercial for the children to pursue anything, but given that the new girlfriend had already spent the money from the liquidated assets (on overseas vacations and other luxuries no less), there really was nothing left.
Although, casting the net wider, it was discovered that there was a superannuation account and a life insurance policy, in addition to several other insurance policies, at the time of death. In total, these were worth a few hundred thousand dollars; enough to cater to all of the needs of the children.
An important point to note is that superannuation and the benefit or proceeds of life or other insurance policies do not automatically form part of a deceased estate. Rather, they are usually, in very general terms, an interest the deceased person had in a separate trust or similar vehicle. The ultimate decision as to when and how those funds are distributed is usually at the discretion of the trustee of that trust, either by reason of the trust deed (or other constituent document), or even by legislation, for example. What this means is that they are not necessarily conclusively dealt with by someone’s Will, and the provisions of such a Will can be overriden by the decision of a trustee, for example.
The children then had several options. The first was that they could approach the Court to seek an order or declaration that these funds were what is known as “notional estate”. This would mean that, generally and effectively, assets not solely in the deceased’s name at the time of death were brough into the wider class of assets forming the estate. However, this would require a Supreme Court application. The other option was to approach the trustee directly, which would prove much quicker and potentially less expensive.
The children chose the latter option, and it was soon discovered that the girlfriend had already done the same. In fact, she had managed to convince the trustee to award the entirety of super and insurance to her. We were able to reverse that decision through an internal review, with the result being that the entirety of super and insurance was to be distributed to the children in equal shares. However, the girlfriend appealed the decision internally, and the matter ultimately ended up in the Superannuation Complaints Tribunal (“the SCT”).
The SCT is a Commonwealth Government body set up to hear these kinds of disputes in a more informal and usually cheaper manner than other avenues, such as the Supreme Court. It is similar to the Financial Ombudsman Service or other bodies, in that it can still make binding determinations and directions.
Ultimately, we won, but the following are some lessons from the case:
1. Always make a valid Will and keep it updated as your circumstances change, to ensure your intentions are fulfilled, and to even prevent the break-up of families.
2. It is worthwhile expressing intentions in a Will with specific reference even to assets that are notional estate, as these will be highly relevant to trustees and also potentially in Court actions.
3. Check to see if your super fund or insurance provider offers death benefit nominations that allow you to direct trustees as to how to distribute any money. These can be binding or non-binding, lapsing or non-lapsing, or a combination of the two. Binding, non-lapsing death benefit nominations are the most secure. Provided you are smart about these in making the right nominations and changing them as circumstances change, this could save a lot of money and heartache for your loved ones when you’re gone, and ensure your wishes are fulfilled.
4. When someone passes intestate (without a Will), or with a Will that seems outdated or otherwise not right or incomplete, see a lawyer as soon as possible about the actual estate assets and the provisions of the Will. In the meantime, look to identify all potential notional estate, including super and insurance. Often Government bodies provide free searches, or you can contact super fund trustees, life insurance providers and other financial services providers directly. You could also see your lawyer about this. Either way, determine what the assets are as soon as possible.
5. It pays to move quickly, as there are those out there who will do so just to get an edge over others. Also, if there is likely to be a dispute, or perhaps even just a few competing interests, it could be crucial to effectively freeze any dealings over estate or notional estate. This can be done by registering a caveat over the estate, obtaining a grant of probate or opposing an existing application for probate, making early applications for family provision orders, internal review with super funds or insurers, or even in the SCT.
If you have an issue with any of the matters discussed above, don’t hesitate to contact us for a free chat.