Gilham

Fred and his ex-wife Joanne have one child, John, who is aged 30. Fred has $500,000 in his public offer superannuation fund. Fred has always been concerned about John’s inability to manage his financial affairs. When Fred dies, he wishes John to inherit his estate, but in a way that will provide John with an income for many years. He does not wish for Joanne to inherit his superannuation.

As Fred’s superannuation fund permits members to make binding death benefit nominations, he gives the trustees a nomination requesting that his superannuation benefit be paid to his estate when he dies. In his Will, Fred provides for the establishment of a testamentary discretionary trust of which John is the beneficiary. He appoints his brother to act as the sole trustee of the trust.

Frank dies shortly after making these arrangements. His $500,000 superannuation benefit is paid to his estate and is included in the assets over which the discretionary trust is established. The trustee can vary the distribution of income and capital to John, both to control the funds he receives and to maximise the tax efficiency of the trust.

In the absence of a binding death benefit nomination from Fred, the trustees of his superannuation fund could have exercised their discretion to pay his death benefit to Ross as a lump sum. This would have meant that John’s ability to access the superannuation benefit was unrestricted and could have led to him misusing his inheritance. Worse, the trustee of Fred’s superannuation fund could have elected to pay the benefit to his ex wife Joanne, which was not Fred’s desired result.

Having a binding death benefit nomination in place means that Frank’s estate planning strategy has been carried out.