Warning: Nominate your beneficiary!

Wills and estates litigator at Owen Hodge Lawyers, Kristy Hatcher, warns about the importance of estate planning and nominating a beneficiary.

Warning nominate your beneficiary

Ross Greenwood: First up on Work.Life.Money, I want to take you to something that most people really don’t want to talk about. But most people understand that it is necessary to make key decisions. This is about what happens when you’re not around anymore. And the fact of the matter is that estate planning is so vital to the way in which you live your life as soon as you start to take on debts and as soon as you become an adult as it were.

How do you work it out in terms of your insurances, your superannuation

But the older you get, the more important it becomes as your assets start to build up. And also even your obligations build up. Kids, grand-kids, what do you do if you’ve got companies, how do you work it out in terms of your insurances, your superannuation, your house, all of this. It’s not easy and in fact, I’ve got to tell you, unless you start relatively early and plan your way through, it can be a complete and utter nightmare.

Now, I just want to bring in here Kristy Hatcher who is a solicitor with Owen-Hodge. They specialize in this whole area of estate planning. But there’s been a range of different issues in the media in the last couple of weeks which really highlighted, and it means if you’re thinking about your super, you’re thinking about your mortgage, you should also be thinking about your estate planning. Kristy is on the line right now. Many thanks for your time, Kristy.

Interview with Kristy Hatcher, Litigator, Owen Hodge Lawyers

Kristy Hatcher: Thank you, Ross.

Ross Greenwood: You would have seen a situation in just the last week or so where basically a tribunal has handed out a man who has died, an airman, less than a quarter of his estate to his daughters. I’ll try to explain it to the people. A fellow called Daniel Leverton was 40 years old. He died suddenly leaving behind two young daughters. He was working for the RAAF as a mechanic, he’d returned from a humanitarian mission in Vanuatu. He was surfing with friends on the mid-north coast of North-South Wales, collapsed, chest pains, typical sort of situation.

What was actually expressed in the will

Now, it’s a premature loss for that family. There was a former partner that he had called Angela Watson who has been named in the media and basically was the mother of his children. Now, she believed that their future would be secure, was previously named as an executor and sole beneficiary of his will. Problem was she didn’t had the vast majority of her ex-partner’s estate, that is the money held in retirement savings, superannuation life insurance, that it would be divided up but there was little weight given to his written will.

In other words, what happened inside the super-fund was completely different to what was actually expressed in the will, and people have got to understand this. Kristy, explain to me how could it possibly be that the determinations of the super-fund could be different to the determinations written down, the expressed wishes inside the will.

Kristy Hatcher: Okay, Ross. Essentially, what most people don’t understand is that superannuation, while it is an asset of yours and is certainly dealt with as part of an estate administration, it is not dealt with under the terms of somebody’s will. Think of it as a mini-will. The superannuation contributions and the death benefit that’s associated with the superannuation entitlement, which in this particular case would be quite large given the age of this person passed away, actually falls under the heading of a different kind of an asset.

You have the right as the owner of the superannuation fund to nominate people who are regarded as your dependants under the superannuation law to be the beneficiaries of those particular proceeds. Now, the way you do that is by completing what’s called a binding death nomination form. Most superannuation funds have this available. There are a small number that don’t where we have to look at other options. The choice and the preference availability is there but a lot of people still don’t understand that this is an issue that they must turn their mind to and nominate this to take the power away from the trustee to determine what is to happen to those proceeds in the event of death.

Ross Greenwood: Okay, so in this case, I should also explain the final sting in the tail here. In this particular case, the person who got most of the assets from the super-fund, it was a big amount of money, almost $350,000, was actually a partner with whom he had been with for just nine months. And yet the determination was that effectively no because this was written down and he had written it, this person was effectively his partner at that time, his inter-dependant partner at the time that he actually wrote down this on his superannuation fund. That held, she got most of the money, the kids basically got give or take $50,000 each, which to me seems a bit rich given the expressed wishes that were inside the last willing testament of this person.

Kristy Hatcher: My understanding of that particular case, it was not that the person had prepared a binding nomination and so, the trustee needed to look for external evidence in terms of who was actually his dependant at the time of his death. And in doing so, one of the documents that they have used as evidence was a statutory declaration whereby he, Mr. Leverton himself stated that he was in a de facto-relationship. And on that basis, because it was in that form, that is what the trustee of the super-fund have given enough weight to as that evidence. That this person should be regarded as a dependant under the law of the superannuation requirements.

Ross Greenwood: Okay, Kristy. I’ll take you to my situation right now. I’m sitting here listening to you tell me this and I’m certain anybody else listening to this would have maybe the same thought. I entered my superannuation fund as a member and I’m trying to think off the top of my head here, 30 years ago for one of them, maybe even longer for another one. I have absolutely no idea who I have put down as my nominated beneficiary in that super-fund.

Kristy Hatcher: Okay, so what you would do is have a look at your most recent superannuation statement. It will state on there who you have nominated as your beneficiary.

Ross Greenwood: I’ve never seen that. I’ve never looked for it. It must have been Kristy.

Kristy Hatcher: [laughs] It will certainly be on there. Now, it may not be on the first page, it may be back towards the end because those documents, we tend to only look at the balance, we look at what the different benefits would be, and then we put it aside and file it.

Ross Greenwood: Have you been looking over my shoulder when I did this, Kristy have you? Because that’s exactly what I do.

Kristy Hatcher: I know exactly what people have been doing.

Ross Greenwood: So it could very well be a lot of people listening to this — it’s certainly not my situation but a lot of people listening to this, they might have had former partners. They might have had other people that they’ve put down as — and of course, when you’re filling those thing out, you’ve come to a new job. Right, fill out your superannuation, who is your next beneficiary? Blah blah blah, you just write it down. You don’t stop and think that at some point, somebody might actually look at that document and rely on what you have written many, many years ago to figure out who they should give your superannuation fund to.

Kristy Hatcher: That’s right, Ross. And more importantly the definition of a dependent changes. Your dependants 30 years ago are different as to who they are this day. And you can only nominate a dependant or your legal personal representative to be the beneficiary of those superannuation proceeds. So even though 30 years ago, you nominated a preference, the laws have changed in terms of superannuation. Binding nominations have become available as an option. Some of those are lapsing, which means must renew that binding nomination every three years, and some are non-lapsing.

It’s a matter of looking at that particular document in the same way that you need to look at the whole estate planning, and re-evaluate it in terms of your current circumstances, your relationships, the future needs. These are not documents you do once and you put aside. They need to be updated, you need to receive proper advice to make sure that your family is protected.

Ross Greenwood: What you’re telling me , Kristy is that this fellow, this RAAF mechanic who found himself — and he’s not around to actually try and say, “Well, some of the money to go here and I want –” he’s not around so somebody else has got to determine the situation. I would’ve thought, Kristy that that situation would be more common than what many people would imagine.

Kristy Hatcher: It is very common and unfortunately, because people don’t understand that only dependants may be nominated under the superannuation entitlement, unfortunately in blended families and in new relationships, there are people who are left behind simply because they don’t qualify because the person did not update the nomination to reflect what they wanted to have happen.

In circumstances where someone may not have a dependant or they want to provide for someone who is no longer an official dependant under the superannuation laws, they need to take that option as to having the superannuation proceeds be payable to their legal personal representative, which means it falls under the terms of their will. So it is available as an option, we just need to get that information out there so people can make informed decisions.

Ross Greenwood: I’ll tell you what, this is just — I think there’d be a few people who’ve just had their eyes opened enormously about this type of thing. Because I’m even starting to think if you want to challenge something like this, even the legal cost to go through this and maybe head off to the courts would be a complete nightmare and would actually strip away some of the assets that might be there in the first place.

How much money has to be spent on fighting

Kristy Hatcher: It is a very disappointing aspect of the work that we do is to see how much money has to be spent on fighting these sort of arrangements. When really a proper information, looking at the circumstances, getting advice, would have saved estates, would have saved families grief, heart ache, all of those things that we want to avoid, simply by turning your mind to it, getting up to date advice.

Ross Greenwood: Kristy Hatcher, I got to tell you. Solicitor with Owen-Hodge, really given you a great lesson in life there. A, be very careful of the forms that you fill out. B, make certain you keep that information up to date and you know what’s taken place, and I’ve got to say here I don’t, so I’m as guilty as anybody. And number three, make certain when you write wills, you recognize that what you have written on those superannuation forms is not necessarily overwritten by your wills. I think that’s what we’ve learned. Kristy, we appreciate your time here in the program today.

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