29/07/2014

In this case, a man died without a surviving spouse or children and without a valid will. His mother, with whom he had a relation of interdependency, applied to the court to be appointed as the administrator of her son's estate.  She acknowledged that in line with rules of intestacy her son's estate would be equally distributed between his two parents.
 
A few days after the appointment the mother made a claim in her personal name to various super funds for her son's superannuation benefits.  As the funds' trustees were satisfied that she was eligible to receive her son's benefits by reason of their interdependency relationship, she received the whole of his superannuation benefits.  She did not make any application for the death benefits in her capacity of administrator of the estate.
 
Wanting a share of the death benefits, the father claimed that the mother's failure to make a claim for the death benefits in her capacity as the administrator of the estate was a breach of her fiduciary duty to maximize the return for the estate.
 
The mother argued that the superannuation benefits did not form part of the estate, which meant she had no obligation to make a claim for them as the administrator of the estate.
 
Who was right?  Ultimately the Court agreed with the father and ordered the mother to transfer the superannuation benefits to the estate, which will then be equally shared between the two parents.  
 
What does the decision tell us?

Executor vs. legal representative: had the deceased made a will the outcome may have been different.  This is because where the deceased names someone whom they know is also a beneficiary as the executor of their estate, the executor may still be able to pursue their personal interests as beneficiary.  That is because the deceased is thought to have 'consented' to the conflict.

The importance of a binding death benefit nomination: had the deceased prepared a valid binding death benefit nomination the mother would have had no issue claiming and retaining the death benefits in her personal capacity as they could never be considered part of the estate. Of course, the son may have directed the fund trustee to pay the benefits to the estate in the first place, thereby making them available to the father.

One hat good, two hats bad: If you know you are a beneficiary of someone's death benefits, and that person dies without a will, consider carefully whether you wish to apply to be named as the administrator of that person's estate.  You might find yourself in the same sticky situation as Mrs McIntosh.

Know your obligations as an estate's administrator:  If in doubt, seek advice from us on how to proceed in your role as administrator as an error in judgment may be costly if challenged.  Call Townsends Business & Corporate Lawyers on (02) 8296 6222.