A senior legal executive has confirmed individuals can choose not to accept a death benefit payment from a superannuation fund in any circumstances, but particularly those where doing so would be a more prudent course of action.
“Why can we disclaim death benefits? You can disclaim any gift. So gifts include a real gift or trustee [discretionary distributions] or super death benefits, et cetera, and that’s because the courts say you can never be forced to take a gift,” Sladen Legal principal Phil Broderick told individuals who attended The Tax Institute National Superannuation Conference recently held in Sydney.
“In a super fund context even if [it involves] a BDBN (binding death benefit nomination), you can disclaim that benefit.”
Broderick stipulated if an individual wants to disclaim a death benefit, those wishes must be communicated in a clear, unequivocal and absolute manner. In addition, he said the intention to disclaim the death benefit must be made in a reasonable time frame and no action can have been taken to accept it.
According to Broderick, there are a number of valid reasons why individuals may want to disclaim a superannuation death benefit.
“Why would you disclaim? Who would give up a gift? Who would give up money? Well maybe the beneficiary is in a family law claim or they have bankruptcy concerns going forward. Maybe the particular beneficiary has Centrelink entitlements they don’t want affected by it,” he suggested.
“Maybe they don’t want the assets and think someone else should get them, particularly [in the case of] elderly spouses who sometimes don’t want the money and would rather it go to the kids.
“Maybe, for whatever reason, [the deceased member has] nominated a non-death benefit dependant [for tax purposes]. So the deceased has nominated the adult children, but they have a spouse who could have [received the payment] tax-free and the children say ‘we don’t need the money, we don’t want the tax liability, we’ll disclaim the benefit’ and the trustee can send it to the spouse.
“Maybe [the recipient is] not happy with the form. So maybe the BDBN has locked in a lump sum to the spouse and [that person] wants to keep it in super [and be paid out] as a pension. You could [then] disclaim the benefit and the trustee [could use discretion] to pay that benefit again, but this time in the form of a pension.”
