In 2013 a woman died. She was the mother of a son who was bankrupt. Her will stated that the bankrupt son was to be the executor of her estate and the sole beneficiary. In addition to this, the mother had not made a Binding Death Benefit nomination for her superannuation. This meant that the payment of the superannuation would be decided by the trustees of the super fund.
The superannuation fund made the decision to have the money from the deceased mother’s superannuation paid to the estate. This then meant that the estate would distribute the money to the sole beneficiary, being the bankrupt son.
The trustee in bankruptcy of the bankrupt son decided to sue for the inheritance paid from the mothers estate, arguing it was an asset that could be used to pay the bankrupt’s debts. The bankrupt son argued that as the money was paid from a superannuation fund, it was protected. This is because the Bankruptcy Act provides that superannuation money paid directly from a deceased persons super fund to a bankrupt may be protected from claims by people or companies that the bankrupt owes money to.
The Court disagreed with the bankrupt son and found that the relevant section of the Bankruptcy Act only applies to payments made directly from the superfund to the beneficiary. As the payment was made to the estate, and then to the son, the protections no longer applied. As a result of this, the money the son inherited was used to pay his debts.
This case shows that circumstances may mean that you should consider making a binding death benefit nomination for your super. By making clear your intentions as to how you want your superannuation distributed, you may avoid unnecessary costs, or a complete loss of inheritance.