Giving consideration as to who will direct the payment of superannuation benefits after a member’s death is as important as deciding who will receive them, with SMSFs granting greater control than other super vehicles, an SMSF lawyer has noted.
DBA Lawyers director William Fettes said the case of Lynn v Australian Financial Complaints Authority [2025] FCA 175 highlighted the benefits of an SMSF where trustee succession could be mapped out alongside a member’s death benefit nomination, making them less likely to be challenged.
“This case is quite interesting. Even though I’m an SMSF lawyer, it’s very important to sort of have a look at this because it outlines the process that applies in the big fund space where you’ve got a death benefit dispute,” Fettes said during a recent webinar.
The case stemmed from the death of Richard Lynn, who was a member of an Australian Prudential Regulation Authority (APRA)-regulated fund. At the time of his passing he was separated, but still legally married and in a non-binding death benefit nomination stated his super death benefits should be paid to his six adult children.
Initially, the trustee decided to pay all the benefits to his estate and then revised this decision to pay them all to his spouse, which led to a complaint to the Australian Financial Complaints Authority (AFCA), which ruled the benefits should be split, with 50 per cent paid to his spouse and 50 per cent to the six children.
This decision was then challenged in the Federal Court, which ruled AFCA had made the correct decision and given due consideration of the financial dependency of Lynn’s spouse.
“Of course, had Mr Lynn had a binding death benefit nomination, none of this would have happened. These non-binding sort of nominations are a cause for these kind of disputes and SMSFs have an advantage here in terms of the ability to make indefinite non-lapsing nominations,” Fettes said.
“But it’s more than that. It’s also about the succession planning aspect and planning who will be a trustee after someone is gone is at least as important as having a nomination and you can do that with an SMSF in a way that you can’t with a big fund.
“In terms of a dispute about a trustee decision about paying death benefits, that won’t go through AFCA either as recourse is via the court process, which is judicial in nature and doesn’t have the same limitations in terms of how AFCA reviews trustee decisions.
“The outcome here, where the wife’s position was preserved at 50 per cent, wouldn’t necessarily apply in a dispute about SMSF death benefits.
“It’s very hard to challenge a trustee’s exercise of discretionary powers to pay death benefits if the trustee is not acting in bad faith and in a prejudicial way.”
