Case 699515

Key Takeaways

In this recent determination, AFCA has reminded the industry that when the distribution of a death benefit is contested and a claim is made by multiple dependants, significant weight should be placed on who the deceased member would have financially supported had they not died.

Brief Facts

The deceased member died and was survived by his wife from whom he was separated (but not divorced), his adult children (a daughter and two sons from his wife), and his de facto partner of 10 years. The deceased's children were all financially independent.

There was no binding death nomination made by the deceased.

The wife, each of the deceased’s adult children and his de facto partner qualified as 'dependants' under the trust deed. Therefore, the trustee had to choose between a number of potential beneficiaries for the distribution of the death benefit.

The trustee determined to pay the entirety of the death benefit to the de facto partner (the trustee’s decision) on the basis that she would have held the expectation of ongoing financial support from the deceased.

The wife and adult children lodged a complaint with AFCA with respect to the trustee’s decision.

Determination

AFCA affirmed the trustee’s decision finding the decision to pay the death benefit to the de facto partner to be fair and reasonable in the circumstances.

On the issue of who could qualify as a dependent, AFCA acknowledged that:

1. Both the wife and de facto partner satisfied the definition of 'spouse' as provided by the Superannuation Industry (Supervision) Act 1993 and therefore could both be considered as dependants.
2. The adult children, as the biological children of the deceased, could also qualify as dependants.

While the wife and adult children also qualified as dependants, AFCA considered that the death benefit should be distributed to the dependants who relied on the deceased for financial support, in line with the very purpose of superannuation, which is to provide income to members and their dependants upon retirement.

The wife and adult children completed statements of interdependence as well as advising AFCA of the following facts:

• the children had a loving and involved relationship with the deceased;
• the deceased provided gifts and made ad hoc financial contributions to the adult children;
• the wife paid for the deceased’s health insurance as well as the deceased’s funeral expenses;
• the wife supported the deceased when he was establishing his acting career;
• the deceased retained a key to the family home and would continually visit and assist with maintenance; and
• the majority of the deceased member’s estate was paid to the wife under an agreement reached between the wife and the de facto partner.

Despite the above, AFCA was not satisfied that they met the interdependence test at law because they did not live with the deceased, and the wife and adult children could not establish they were financially dependent to the extent that the deceased provided constant ongoing financial support.

ACFA turned to consider what might have occurred had the deceased member not died, and who would have had the expectation of ongoing financial support. AFCA found that the trustee’s decision to pay the entirety of the death benefit to the de facto was fair and reasonable in light of this consideration.

Implications

This determination shows that AFCA is more likely to uphold a trustee’s death benefit distribution decision as fair and reasonable in the circumstances if it is satisfied that the trustee has made a decision having regard to the degree to which the beneficiaries were financially dependent on the deceased and who the deceased would have supported if they had remained alive.

Trustees should continue to ask themselves in death benefit distribution cases which of the competing parties would have an expectation of future financial support if the deceased remained alive.