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Poor nominations – chilling effects

Every month we would cite a nomination of a beneficiary in superannuation that is plainly incorrect and will not be acceptable to Trustees of a superannuation fund. You might ask how that can be given it’s your money – shouldn’t you be able to nominate whoever you like?

Sadly, the answer is “No” you can’t. While you can make a nomination, unless it meets the required criteria, then the Trustees will set it aside. An example of this is the particularly sad case of Ashleigh Petrie who nominated her Mother as the beneficiary of her superannuation fund investment balance and life insurances held in her REST superannuation fund. At the age of 23, Ashleigh tragically died in a motor vehicle accident. She had over the previous seven months been involved in a new relationship and had cohabitated for a period of four months leading to her engagement, one month prior to her demise.

The nomination to her Mother, whom she has been supporting periodically with cash transfers and purchases, was disregarded by the REST Trustees who deemed that Ashleigh’s Mother did not meet the criteria necessary for the nomination to be accepted. Nominations need to be to either a spouse or defacto, a member’s child of any age or to someone whom you have a close personal relationship (ie live with one another and where one or each other provide domestic support and personal care) or be financially dependent. It’s a really tough call, especially in this case where the recipient was earning greater than $300,000 and possessed significant assets in excess of Ashleigh’s Mother. A chilling consequence!

I mentioned at the beginning, we review superannuation nominations each month – many which are unfortunately not legally binding. Even legally binding nominations only last for three years in most superannuation funds and unless renewed they lapse. Another misconception, is that most people assume that superannuation will go according to their Will. Unfortunately, unless you nominate your Legal Personal Representative, this will not be the case. Also having your superannuation go to your Legal Personal Representative isn’t always the best choice, given once in the Estate it is open for to challenge by disaffected beneficiaries. As you can see it’s a minefield and really needs to be thought and worked through.

We all know that superannuation is complex at the best of times. Litigation claims for these types of benefits are rising exponentially, especially in these times where superannuation and life insurance account for a significant percentage of people’s wealth and where we have increasingly blended families and a growing sense of entitlement across all sections of society.

If you haven’t reviewed your Estate Planning, it’s probably timely. Hopefully this article gets you thinking. Have a great week!

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