The six-month timeframe to pay a death benefit from a superannuation fund to a beneficiary is a myth that is often conflated with the requirement to make the payment in a timely manner and practitioners should note for clients what issues will shorten or lengthen that period, a legal expert has noted.
Business Depot legal director Neal Dallas said the idea a death benefit had to be paid out within six months was most likely related to rules around probate, but these had no application to superannuation payments.
“There are rules about getting probate with three months and settling an estate in six months which is where I think this idea comes from but [for superannuation] there’s no such rule and there is this urban myth about six months being the timeframe,” Dallas told attendees of an Accurium webinar yesterday.
“I hear it all the time and I feel like the odd guy out because I keep saying there’s no such rule and the requirement to make a payment is ‘as soon as practicable’.
“That can mean it might be practicable to do in a matter of weeks or less if there is a liquid fund with only one beneficiary [allowing you to] rapidly go through the checklist and get to a result.
“In other cases, it may be a much longer timeframe than six months if there are illiquid assets that are difficult to sell or liquidate or unlisted units and unit trusts that you don’t necessarily have any direct control over.”
According to Dallas delays were also possible where there was some contention over the estate and uncertainty as to superannuation beneficiaries, which could delay any payments beyond the six month mark.
To that end, he advised practitioners to document what was taking place and why things were delayed.
“Have a process and follow it and document the fact that you follow it. If you don’t have a process and there is a delay and someone later scrutinizes it, everyone’s got the benefit of hindsight,” he suggested.
“So document that and be vigilant about the follow up, especially if someone else is causing a delay. If the valuer is taking too long to do the valuation, then document that. If there is a need to get a new valuer, examine that. If that’s causing delays, then get someone else involved.”
