Principal Conrad Curry and solicitor Lauren Faulkner recently settled a family provision claim relating to a Death Benefit Settlement on behalf of three young adults. Our clients had sadly lost their father (‘the Deceased’), who passed away without having made a Will.
While the Deceased did not have any estate assets at the time of his death, he did hold a superannuation death benefit policy in the sum of $260,000.
A dispute then arose as ‘Mr D’ claimed to have been the Deceased’s de facto partner. In other words, Mr D contended that he was wholly entitled to the Deceased’s death benefit. While our clients acknowledged that Mr D and their father had a close friendship, they otherwise denied the existence of a de facto relationship.
Based on evidence provided by Mr D, the Trustee of the superannuation fund initially made the decision to pay 100% of the Deceased’s death benefit to Mr D (‘the February 2020 decision’). It was at this point that we commenced acting on behalf of our clients.
No Binding Nomination
For a death benefit nomination to be binding, the superannuation member must nominate at least one dependent under their policy. The following persons are examples of dependents for the purposes of superannuation law:
- Spouses (including de facto and same sex);
- Children (of any age, including those who are adopted);
- Persons who were financially dependent / in a relationship of interdependency; and
- Legal Personal Representatives (eg an executor under a Will).
Unfortunately, the Deceased had not nominated anyone under his policy. In the circumstances, the Trustee was left with the ultimate discretion as to how the Deceased’s death benefit ought to be distributed (and more importantly, to whom).
Our Advice
We advised our clients to commence family provision proceedings in the Supreme Court, based on the fact that the Deceased had not adequately provided for their ‘proper maintenance, education or advancement in life’. The Deceased had a moral obligation to do so as a parent.
On our clients’ instructions, we lodged an objection to the Trustee’s February 2020 decision. The Trustee agreed to refrain from distributing the proceeds of the Deceased’s death benefit until further notice. We then began drafting evidence in support of our clients’ position, being that they should receive the Deceased’s death benefit (instead of Mr D).
Our Argument
In order for the Court to make a finding that a de facto relationship existed, Mr D and the Deceased must have been living together for a continuous period of two (2) years. The Deceased had been living in a different state to Mr D until November 2016 – with his date of death in June 2018. Our clients’ evidence (including lay, medical and business records) also indicated that from November 2016 onwards the Deceased never permanently resided with Mr D.
Trustee’s Second Decision
Based on additional evidence submitted by our clients, the Trustee changed its initial decision and instead elected to pay 100% of the Deceased’s death benefit to his Legal Personal Representative (‘the June 2020 decision’). The Trustee was no longer persuaded that Mr D and the Deceased were in a de facto relationship, noting that Mr D’s evidence to support his claim was weak.
While the June 2020 decision was welcomed by our clients, it was largely unhelpful from a legal perspective and only complicated the matter more.
The Implication of Taxation
A de facto partner does not have to pay tax on any death benefit received. In comparison, children over the age of 18 (who were not financially dependent on, or in a relationship of interdependency with, their parent) do incur tax. This became an important consideration for our clients.
Reaching Settlement
The Court ordered the parties to engage in a settlement conference, which took place in July 2020. The matter was finalised at the consent of the parties shortly after.
If you would like to know more about whether you may be able to make a family provision claim, we would be pleased to speak with you to advise you about your options. You can either book an appointment online or call us on (02) 4050 0330 for an obligation-free consultation.