1 Appendix A Superannuation Death Benefits and Estate Planning - a legal perspective The Senate Select Committee on Superannuation has asked for a submission of the law relating to superannuation death benefits and the impediments that exist in the administration of death benefits. This submission will address the issues that arise for both heterosexual single and married persons and gay and lesbian members and concentrates for convenience on Federal and NSW law. It will address the following: The importance of understanding the legal issues surrounding superannuation death benefits; The legal issues in relation to estate planning upon divorce and remarriage - the challenge for combined families; Legal issues affecting gay and lesbian couples; The controversial Property (Relationships) Act 1984 (NSW) as amended at 13 July 1999. It should be noted that this area of the law is something of a minefield and that much confusion still exists in both the community and amongst many lawyers and accountants alike about the law regulating the payment of death benefits from a person‟s interest in a superannuation fund. The most common misconception is that a superannuation death benefit automatically forms part of a deceased‟s estate. The Trust Deed As the committee will know, the governing rules of a superannuation fund are found in the trust deed. The trustee is bound by these rules and by the law regulating super funds. The relevant law is the Superannuation Industry (Supervision) Act 1993 (“SIS”) and its Regulations and, if a dispute arises, the Superannuation (Resolution of Complaints) Act 1993. Trust deeds vary from fund to fund. Typically however, a clause to the following effect will be found in a trust deed: „The Trustee in its absolute discretion may pay a death benefit to the one or more of the following: a dependant or dependants of the deceased; a person who is wholly or partly dependent upon the deceased at the time of his or her death; the legal personal representative of the deceased ie the executor of the estate or a person to whom letters of administration have been granted; where none of the above can be identified, an individual.” D:\Docstoc\Working\pdf\813dd827-88c6-4ed5-a569-c15ee94c46a1.doc 2 “Dependant” is defined to mean: a spouse of the deceased (including a de facto spouse who is residing on a bona fide domestic basis with the deceased at the time of death) but does not include a same sex partner; a child or children of the deceased in all of their shapes and forms - children of the relationship, adopted children, step-children and so on; a person who is wholly or partly dependent upon the deceased at the time of death‟ Such a provisions exists in the context of Section 621 of SIS which sets out the sole purpose of superannuation funds and SIS Regulation and which prescribes in which 1 SUPERANNUATION INDUSTRY (SUPERVISION) ACT 1993 SECT 62 62 Sole purpose test (1) The trustee of a regulated superannuation fund must ensure that the fund is maintained solely: (a) for one or more of the following purposes (the core purposes ): (i) the provision of benefits for each member of the fund on or after the member's retirement from any business, trade, profession, vocation, calling, occupation or employment in which the member was engaged (whether the member's retirement occurred before, or occurred after, the member joined the fund); (ii) the provision of benefits for each member of the fund on or after the member's attainment of an age not less than the age specified in the regulations; (iii) the provision of benefits for each member of the fund on or after whichever is the earlier of: (A) the member's retirement from any business, trade, profession, vocation, calling, occupation or employment in which the member was engaged; or (B) the member's attainment of an age not less than the age prescribed for the purposes of subparagraph (ii); (iv) the provision of benefits in respect of each member of the fund on or after the member's death, if: (A) the death occurred before the member's retirement from any business, trade, profession, vocation, calling, occupation or employment in which the member was engaged; and (B) the benefits are provided to the member's legal personal representative, to any or all of the member's dependants, or to both; (v) the provision of benefits in respect of each member of the fund on or after the member's death, if: (A) the death occurred before the member attained the age prescribed for the purposes of subparagraph (ii); and (B) the benefits are provided to the member's legal personal representative, to any or all of the member's dependants, or to both; or (b) for one or more of the core purposes and for one or more of the following purposes (the ancillary purposes ): (i) the provision of benefits for each member of the fund on or after the termination of the member's employment with an employer who had, or any of whose associates had, at any time, contributed to the fund in relation to the member; D:\Docstoc\Working\pdf\813dd827-88c6-4ed5-a569-c15ee94c46a1.doc 3 circumstance and to whom a Regulation 6.22 superannuation benefit may be cashed. Unless a Fund‟s trust deed has been amended to take in Section 59(1A) of SIS which allows for binding death benefit nominations, but which more often than not is still relatively rare, the Trustee of a fund when faced with this wording has a number of alternatives. The trustee, after obtaining certified copies of the member‟s birth certificate, marriage certificate, if any, death certificate (these usually give a lot of clues as to potential recipients as they set out the name of the deceased‟s spouse(s) and children), nomination of beneficiary form and will, if any, typically follows the following process: It makes inquiries: to ascertain all of the potential recipients of the deceased‟s superannuation death benefit. (ii) the provision of benefits for each member of the fund on or after the member's cessation of work, if the work was for gain or reward in any business, trade, profession, vocation, calling, occupation or employment in which the member was engaged and the cessation is on account of ill-health (whether physical or mental); (iii) the provision of benefits in respect of each member of the fund on or after the member's death, if: (A) the death occurred after the member's retirement from any business, trade, profession, vocation, calling, occupation or employment in which the member was engaged (whether the member's retirement occurred before, or occurred after, the member joined the fund); and (B) the benefits are provided to the member's legal personal representative, to any or all of the member's dependants, or to both; (iv) the provision of benefits in respect of each member of the fund on or after the member's death, if: (A) the death occurred after the member attained the age prescribed for the purposes of subparagraph (a)(ii); and (B) the benefits are provided to the member's legal personal representative, to any or all of the member's dependants, or to both; (v) the provision of such other benefits as the Regulator approves in writing. (1A) Subsection (1) does not imply that the trustee of a regulated superannuation fund is required to maintain the fund so that the same kind of benefits will be provided: (a) to each member of the fund; or (b) in respect of each member of the fund. (2) Subsection (1) is a civil penalty provision as defined by section 193, and Part 21 therefore provides for civil and criminal consequences of contravening, or of being involved in a contravention of, that subsection. (3) An approval given by the Regulator for the purposes of subsection (1) may be expressed to relate to: (a) a specified fund; or (b) a specified class of funds. D:\Docstoc\Working\pdf\813dd827-88c6-4ed5-a569-c15ee94c46a1.doc 4 to establish whether the deceased has nominated a beneficiary or beneficiaries. The Trustee considers the date of the nomination and must consider whether it accords with the law. If one does not have a significant heterosexual other, there is no use nominating one‟s same sex partner as one‟s spouse or in nominating one‟s mother as a beneficiary, for example. Unless the same sex partner or mother can prove that he or she was wholly or partly dependent upon the deceased at the time of his death, such a nomination is futile. as to whether the deceased‟s personal circumstances have changed - for example, whether the deceased had left his or her husband or wife and was residing on a bona fide domestic basis with another man or woman - of the opposite sex at the time of his or her death. to establish whether the deceased left a will and, if so, on what date the will was made. If there is no will the trustee will inquire as to whether there is someone who is available, typically a close relative, to apply to the probate division of the relevant State‟s Supreme Court for letters of administration. It is usually the preferred option of trustees to request that such an application be made especially if there is a large sum of money involved. If the will was made later than the deceased completed, signed and dated his or her nomination of beneficiary form, it would be in order for the Trustee to take the view that the will is the „fresher‟ expression of the deceased‟s wishes and that the will therefore encapsulates a more accurate expression of the deceased‟s wishes. If the nomination of beneficiary form was completed at a later date the converse would of course apply. Unless the trust deed has been amended to allow for binding death benefit nominations, the payment of a death benefit is entirely at the discretion of the trustee after considering all of the circumstances of the case. This power is given to the Trustee under the provisions of both the trust deed and SIS. SIS Section 583 provides that except in certain 3 SUPERANNUATION INDUSTRY (SUPERVISION) ACT 1993 SECT 58 58 Trustee not to be subject to direction (1) Subject to subsection (2), the governing rules of a superannuation entity other than a superannuation fund with fewer than 5 members or an excluded approved deposit fund must not permit the trustee to be subject, in the exercise of any of the trustee's powers under those rules, to direction by any other person. (2) Subsection (1) does not apply to: (a) a direction given by a court; or (b) a direction given by the Regulator; or (c) a direction given by a beneficiary or a group of beneficiaries that relates to benefits payable to that beneficiary or those beneficiaries, as the case may be; or (d) a direction given by a beneficiary or group of beneficiaries, where the direction is covered by subsection 52(4); or (e) if the entity is an employer-sponsored fund—a direction given by an employer-sponsor, or an associate of an employer-sponsor, in circumstances prescribed by the regulations; or (f) a direction given by the Superannuation Complaints Tribunal; or (g) a direction given by a member (within the meaning of the Superannuation Contributions Tax (members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 ) that is permitted to be given by subsection 15(8A) of that Act. D:\Docstoc\Working\pdf\813dd827-88c6-4ed5-a569-c15ee94c46a1.doc 5 prescribed circumstances, a Trustee of a super fund shall not be subject to direction by any person. In my experience, where there are dependants, as defined in the trust deed and under the provisions of SIS, it is unusual for a Trustee to opt to pay a death benefit to the legal personal representative or executor of the estate. The reason for this is simple. The main purpose of a fund, as expressed in section 62 of SIS, is to look after the member in the event of his or retirement or in the event of his partial or total disablement or, in the event of the deceased‟s death, to provide for the member or for the member‟s dependants. There are sound policy reasons for this - it prevents the deceased‟s dependants, typically a spouse and children from having to resort to the public purse for their livelihood and, perhaps, more importantly, from the recipient‟s viewpoint, there are good tax reasons for this approach. Depending on the class of beneficiary who receives the benefit, tax concessions are available if the death benefit is paid directly to a dependant. Benefits paid to a spouse, a child under the age of 18 years, or a person who is financially dependent on the deceased (up to the deceased‟s Reasonable Benefit Limit) will be tax free in the hands of the recipient. However, a death benefit paid to the legal personal representative or to a person who is a dependant under the definition of the deed but not under the definition found in the Income Assessment Act - for example, an adult child who is not financially dependent, will be taxed as an eligible termination payment. If paid to the legal personal representative it will only be tax free to the extent that the Commissioner determines that the ultimate beneficiary/ies will be the spouse, dependent children or otherwise financially dependent persons. Lawyers practising in this area of the law come across some complicated scenarios. Take for example the woman who dies and nominates her legal personal representative as the nominated beneficiary of her death benefit. She is divorced and leaves behind a ten year old son. The child‟s father and guardian are impecunious. Not only is the estate in effect bankrupt due to her many debts but she also leaves bequests in her will for her various relatives which the estate, without the benefit of receipt of the super death benefit, is incapable of paying. What does the Trustee do? Does it accord with her expressed wishes or does it, assuming that this is a deed that does not provide for binding death benefit nominations, go against her wishes and in the best interests of the child decide not to “waste” the death benefit and to set up a trust for his education, welfare and advancement in life? Interestingly, if the Trustee accords with her expressed wishes it may later expose itself to action for a breach of fiduciary duties and trust by the deceased‟s dependent (by analogy, see the principles enunciated in Hill v Van Erp (1996-1997) 188 CLR 159). [See also the following: Sir Anthony Mason "The Place of Equity and Equitable Remedies in the Contemporary Common Law World", (1994) Vol 110 The Law Quarterly Review 238. (3) If the governing rules of a superannuation entity are inconsistent with subsection (1), that subsection prevails, and the governing rules are, to the extent of the inconsistency, invalid. D:\Docstoc\Working\pdf\813dd827-88c6-4ed5-a569-c15ee94c46a1.doc 6 Mr J.D. Heydon QC "Causal Relationships Between a Fiduciary's Default and the Principal's Loss" Vol 110 The Law Quarterly Review 328. Gummow J "Compensation for Breach of Fiduciary Duty" T.G. Youdan (ed) "Equity, Fiduciaries and Trusts" (1989) p.90.] Take the man that has allegedly murdered his wife. She does not leave a will but he is her nominated beneficiary. Should he as the nominated beneficiary and dependent spouse of the deceased automatically receive the benefit or should the Trustee wait until the case has been heard. If he is found guilty of murder, should the Trustee pay the death benefit to him or rely on laws preventing persons benefiting from the fruits of crime and/or exercise its discretion to pay the death benefit to the person who obtained letters of administration of the estate under the intestacy laws, then let the Supreme Court sort out the estate once the deceased‟s family file proceedings under the provisions of the Family Provision Act 1984. Or, if she has adopted his child, should the Trustee look to the exclusive interests of that child. What does the Trustee do if the deceased has nominated his de facto wife of 20 years as his nominated beneficiary, then they separate and as a result of his depression and 2 days after the separation he commits suicide? Technically, unless she can prove that she is wholly or partly dependent upon the deceased, she is no longer living in a bona fide domestic relationship with him and is no longer an eligible recipient of the death benefit. Although depressed, he has promptly changed his will and leaves his entire estate to the Cancer Council. What if Pilot Pete is married with 3 children, nominates his wife and adult children of his marriage as the beneficiaries of his death benefit. His will reflects a similar expression of wishes. Meanwhile Pilot Pete has not only been conducting a gay relationship for some 12 years with a man who can prove that he is wholly financially dependent on the deceased, but he has also set himself up in another port with a de facto wife who has had a child to him and also can prove that she is also substantially financially dependent upon him. What of the separated husband who commits suicide but changes his nomination of beneficiary form to exclude his wife, nominate his children aged 6, 3 and 2 years old and his non financially dependent mother as beneficiaries? And last but not least what does the trustee do with death benefit of the truck driver who during the working week resides in a boarding house with Mrs A and returns to his wholly dependent de facto wife, Mrs B each weekend. His nomination of beneficiary form has not been completed and his will leaves everything to his children of his first marriage all of whom are adult and financially independent. Mrs A claims that she has been doing more than the washing and that she has been living in a de facto relationship with him for some 10 years, a fact which Mrs A‟s daughters and her bank statements may attest to. The SCT regularly deals with complicated death benefit cases involving combined families and other complexities of human relationships and expectations. Steps to be taken in identifying to whom a death benefit should be paid Firstly, the relevant fund‟s or funds‟ trust deed must be perused to see if it provides for a binding death benefit nomination. If it does not provide this, the adviser must explain the legal ramifications of this to those affected - as explained above. As mentioned above, SIS has now been amended to permit members of super funds to make binding death benefit nominations, IF the governing rules of the fund allow it. In spite of sound D:\Docstoc\Working\pdf\813dd827-88c6-4ed5-a569-c15ee94c46a1.doc 7 philosophical reasons for allowing binding death benefit nominations for example, the move toward greater member choice and a move away from the paternalistic nature of super funds historically - as well as human rights and discrimination law bases justifying such amendments, currently most trust deeds do not contain such provisions. Why you might ask? The main reason is the high cost of administering the amendment, a cost which under the old discretionary regime is and was already high as a result of the claim staking procedures which most trustees opt to follow if they wish to avert complaints being made to the Superannuation Complaints Tribunal under the provisions of the Superannuation (Resolution of Complaints) Act 1994. In summary and where the discretionary regime has been maintained, the claim staking procedures may be summarized as follows: The trustee ascertains all of the potential recipients of the death benefit; It obtains statements of financial and personal circumstances from them; It makes a decision as to whom and in what proportions the death benefit should be paid; It notifies all of the potential recipients, including the executor/legal personal representative of its decision; It gives each party 28 days to complain about its decision; If a complaint is received, it notifies all concerned and reconsiders its decision; It notifies all affected of the decision and tells them they have 28 days in which to complain to the SCT; If the disgruntled person does not complain to the SCT within the prescribed period4 , that person is precluded from lodging a complaint with the SCT. It should be noted however, that except for the usual limitation periods, the person is not precluded from initiating proceedings in the Federal Court. In advising and setting out these claim staking procedures, affected potential recipients, even though represented, frequently do not get their complaint into the SCT within the requite 28 days and are therefore SCT limitation period excluded. Lawyers acting for such persons have potential liability for negligence claims where they do not advise on the effects of the limitations period. If a binding death benefit nomination is permitted by the fund‟s trust deed, the SIS Regulations make payment to the nominated beneficiary mandatory provided that the requirements in the SIS Regulations are satisfied. If the fund includes a binding death benefit nomination clause while it is the trustee‟ s duty to do so in annual statements, clients may still need to be reminded of the need to update his or her nomination form in accordance with the law. To make a binding death benefit nomination, under the SIS Regulations, the nomination (including a revocation notice): Must be in writing; 2 28 days see Section 15(2)(a) D:\Docstoc\Working\pdf\813dd827-88c6-4ed5-a569-c15ee94c46a1.doc 8 Must be signed and dated by the member in the presence of 2 witnesses who are: 1. Over the age of 18 2. Are not nominated to receive a benefit in the notice (but may be beneficiaries of the person‟s estate, if a legal personal representative is nominated) Must contain a declaration signed and dated by the witnesses stating that the notice was signed by the member in their presence. The trust deed should be read carefully to see if there are any specific restrictions which, if not adhered to, will invalidate the nomination. The nomination can be accepted by the trustee if: Each death benefit nominee is a dependant or is a legal personal representative of the member; The proportion to be paid to each nominee is certain or readily ascertainable; and The notice is in the approved format (if not, the trustee has an obligation to seek more information under SIS Regulation 6.17B). Under the SIS Regulations, the nomination will be binding at the date of death if: Each death benefit nominee is clear; The notice is in the approved format; and The notice is in effect: - Signed within the 3 years prior to the date of death; or - A shorter period as defined in the governing rules. If the nomination is invalid and not binding the trustee must pay in accordance with the default option - usually the legal personal representative or payment at the Trustee‟ s discretion. Binding death benefit nominations can easily become invalid and open to contest if for example one of the nominated beneficiaries no longer meets the definition of dependant or if the member was in some incapacitated at the time he or she purported to make the binding death benefit nomination. Issues of duress, undue influence and nominated beneficiary causes the death are factors leading to arguments that the nomination if invalid. All members of super funds who have given a binding death benefit nomination to the trustee must receive the following additional information with the annual benefit statement: The name of each person nominated or class of person nominated (e.g. spouse, children) and the proportion of the benefit to be paid to each (or how that proportion is to be determined); D:\Docstoc\Working\pdf\813dd827-88c6-4ed5-a569-c15ee94c46a1.doc 9 A statement explaining the effect of a nomination a beneficiary i.e. provided that each nominated person is a dependant or legal personal representative at the time of death and proportions are clear, the trustee must pay the benefit to that person or persons; A statement that the member may confirm, amend or revoke the notice at any time; The date that the notice ceases to have effect (i.e. 3 years after the nomination was first signed or a shorter period as determined in the governing rules; and A form to enable the member to confirm, amend or revoke the current nomination of beneficiary. (Note that confirmation of a previous nomination must be in writing but does not need to be witnessed. Amendment or revocations must be witnessed). D:\Docstoc\Working\pdf\813dd827-88c6-4ed5-a569-c15ee94c46a1.doc 10 Binding death benefits, especially where the nominated beneficiary is the deceased‟s legal personal representative, is often seen as the most equitable way of dealing with a person‟s superannuation death benefit and certainly as the best way of respecting a deceased person‟s wishes. However, conversations with estate planners reveal that many persons do not have their wills in order and, if they do, they in particular, do not address the question of exactly how much they anticipate will fall into the residue of their estate. Often the calculation of what will fall into residue is simply not undertaken and their real intention is therefore inadvertently not carried out.5 Family Provision Act 1982 (NSW) A number of commentators6 have raised the spectre the NSW Family Provision Act 1982 in relation to the question of whether or not a valid binding death benefit is watertight in all of the circumstances. The answer seems to be no it is not and claim staking by trustees continues to be a prudent course. The reason for this is that under the provisions of the Family Provision Act 1982 (the “ACT”) a superannuation death benefit may be construed to form part of a deceased‟s „notional estate‟. „Notional estate‟ is property that is subject to a prescribed transaction under section 22 of the Act7 . A 5 My thanks to Eleanor Dartnall, Senior Financial Consultant, Perpetual Trustee Company Limited for pointing out this estate planning glitch. 6 See Phillips Fox Australian Superannuation Law Update June 1999 and Jane Paskin, Australian Superannuation Law Bulletin, Vol 11 No 1 August 1999 7 Section 22 - Prescribed transactions (1) A person shall be deemed to enter into a prescribed transaction if: (a) on or after the appointed day the person does, directly or indirectly, or omits to do, any act, as a result of which: (i) property becomes held by another person (whether or not as trustee), or (ii) property becomes subject to a trust, whether or not the property becomes in either case so held immediately, and (b) full valuable consideration in money or money's worth for the firstmentioned person's doing, or omitting to do, that act is not given. (2) Except as provided in subsections (5) and (6), a prescribed transaction referred to in subsection (1) shall, for the purposes of this Act, be deemed to take effect at the time property becomes held by a person or subject to a trust as referred to in subsection (1) (a). (3) The fact that a person has done, or omitted to do, an act as a result of which property became held by another person or subject to a trust shall not prevent a later act or omission by the firstmentioned person (as a result of which the same property becomes held by another person or subject to a trust) constituting a prescribed transaction. (4) In particular and without limiting the generality of subsection (1), a person shall, for the purposes of subsection (1) (a), be deemed to do, or omit to do, an act, as a result of which property becomes held by another person or subject to a trust if: (a) the person is entitled, on or after the appointed day, to exercise a power to appoint, or dispose of, property which is not in the person's estate but the power is not exercised before the person ceases D:\Docstoc\Working\pdf\813dd827-88c6-4ed5-a569-c15ee94c46a1.doc 11 (by reason of death or the occurrence of any other event) to be so entitled and, as a result of the omission to exercise the power and of the person's death or the occurrence of the other event: (i) the property becomes held by another person (whether or not as trustee) or subject to a trust (whether or not the property becomes in either case so held immediately), or (ii) another person becomes (whether or not immediately) or, if the person was previously entitled, continues to be, entitled to exercise the power, (b) holding an interest in property which would, on the person's death, become, by survivorship, held by another person (whether or not as trustee) or subject to a trust, the person is entitled, on or after the appointed day, to exercise a power to prevent the person's interest in the property becoming, on the person's death, so held or subject to that trust but the power is not exercised before the person ceases (by reason of death or the occurrence of any other event) to be so entitled, (c) holding an interest in property in which another interest is held by another person (whether or not as trustee) or is subject to a trust, the person is entitled, on or after the appointed day, to exercise a power to extinguish the other interest in the property but the power is not exercised before the person ceases (by reason of death or the occurrence of any other event) to be so entitled and, as a result of the omission to exercise the power and of the person's death or the occurrence of the other event, the other interest in the property continues to be so held or subject to that trust, (d) the person is entitled, on or after the appointed day, in relation to a policy of assurance on the person's life under which money is payable in consequence of the person's death or, as the case may require, in consequence of the occurrence of any other event to a person other than the executor or administrator of the person's estate, to exercise a power: (i) to substitute a person or a trust for the person to whom or trust subject to which money is payable under the policy of assurance, or (ii) to surrender or otherwise deal with such a policy of assurance on the person's life, but the power is not exercised before the person ceases (by reason of death or the occurrence of any other event) to be so entitled, (e) being, on or after the appointed day, a member of, or participant in, a body (corporate or unincorporate), association, scheme, fund or plan, the person dies and, as a result of the person's being such a member or participant and of the person's death or the occurrence of any other event, property becomes held by another person (whether or not as trustee) or subject to a trust (whether or not the property becomes in either case so held immediately), or (f) on or after the appointed day, the person enters into a contract providing for a disposition of property out of the person's estate (whether the disposition is to take effect before, on or after the person's death and whether in pursuance of the person's will or otherwise). (5) Except as provided in subsection (6), a prescribed transaction involving the doing of, or omitting to do, an act as referred to in subsection (4) (paragraph (f) excepted) shall be deemed to be entered into immediately before, and to take effect on, the death or the occurrence of the other event referred to in that subsection in relation to that act or omission. (6) Where: (a) a prescribed transaction involves any kind of contract, and (b) valuable consideration, although not full valuable consideration, in money or money's worth is given for the disponer's becoming a party to the contract, the transaction shall, for the purposes of this Act, be deemed to be entered into and to take effect at the time the contract is entered into. D:\Docstoc\Working\pdf\813dd827-88c6-4ed5-a569-c15ee94c46a1.doc 12 transaction is prescribed if the person does, directly or indirectly, or omits to do, within 3 years of his or her death any act resulting in property becoming held by another person (whether or not a trustee) where full valuable consideration is not given by the person obtaining the benefit of the property. The upshot of this twist is that it would be prudent for trustees of super funds in NSW to claim stake persons who are eligible persons under section 6 of the Act otherwise risk an action for breach of trust. It would also be prudent for those acting for potential claimants under a death benefit claim to ensure that they advise their clients, assuming that they fall within the section 6 definition of eligible persons, to commence action to set aside the binding death benefit nomination. Notably ex spouses may be caught by the definition of eligible person under section 6 of the Act where they may not be caught by the SIS definition of dependant. I refer you in particular to Pope & Ors v Christie Matter No 4918/94  NSWSC 1188 (16 April 1998) which is a case on point and which involves circumstances where there was, as His Honour Justice Young put it, friction between the children of the first marriage and the deceased's second wife. The judge found for the plaintiff adult daughter of the deceased‟s first marriage and amongst other orders, made an order designating the Asgard investment account as notional property up to the extent required to meet the deficiency in the actual estate. It is important to note, however, that in a social climate where about one in two marriages fail, estate planning becomes even more important and complex, as does the administration and treatment of a superannuation death benefit. In each case, it is all a matter of identifying all of the potential recipients and weighing up the equities. This area is particularly vexed as may be understood by a reading of the SCT cases, some of the references for which I set out below: Determination Number: D00-01\066 Determination Number: D00-01\098 Determination Number: D00-01\123 Determination Number: D00-01\106 Determination Number: D00-01\132 (7) Notwithstanding subsections (1) and (4), the making by a person of, or the omitting by a person to make, a will is not an act or omission referred to in subsection (1) (a) except in so far as it constitutes a failure to exercise a power of appointment or disposition in relation to property which is not in the person's estate. 8 In this case, Justice Young interestingly said: “Accordingly, I need to turn to the question of notional estate. This requires consideration of s 22 of the Family Provision Act. Section 22 (4) (e), when read with s 24 (f), means that if the testator is a member of a superannuation scheme and, on the occurrence of a decision made by the trustees of that scheme, moneys are payable to a person, then immediately before the person's death the person is deemed to have entered into a prescribed transaction. If a person has entered into a prescribed transaction within three years of his or her death then the court can designate the property as notional estate. There has been some argument before me as to whether this provision applies to this superannuation fund. Some argument was put as to the fact that in the present case there was no nomination of a beneficiary. I recognise that that is so, but it does not seem to me that that affects the operation of par (e). It may be that there is a stronger case if there is an act of nomination, but I cannot see why the paragraph does not apply generally.” D:\Docstoc\Working\pdf\813dd827-88c6-4ed5-a569-c15ee94c46a1.doc 13 Determination Number: D00-01\033 Determination Number: D00-01\083 Determination Number: D00-01\042 (a real doozey!) Determination Number: D00-01\066 Determination Number: D00-01\080 ( involves the First Joined Party (Adult only Daughter of Deceased Member's second de facto relationship), the Second Joined Party (Adult only Son of Deceased Member's marriage) - other persons referred to: The Deceased Member The Wife of Deceased Member The First De Facto Wife of Deceased Member The Second De Facto Wife of Deceased Member The Third De Facto Wife of Deceased Member) Superannuation and the Same Sex Partner Dilemma Homosexual orientation is a reality today which the law must recognise and adjust to, and it may well be thought appropriate that the fundamental principle of equality and the irrelevance of a person’s and sexual identity demand that the court be alert to afford protection in terms of employment: R v Secretary for State for Defence; ex parte Perkins  IRLR 297, at page 303. In a speech given at King‟s College School of Law, University of London on 3 July 1999, the Hon Justice Michael Kirby AC CMG, Justice of the High Court of Australia and Commissioner of the International Commissioner of Jurists said: „Virtually every jurisdiction of the common law is now facing diverse demands for the reconsideration of legal rules as they are invoked by homosexual litigants and other citizens who object to discrimination. To some extent the standards of change have been set by regional bodies such as the European Court of Human Rights and international bodies such as the United Nations Human Rights Committee.‟ Legal issues affecting gay and lesbian couples or same sex partners It is certainly the case that at least at a State level some laws affecting same sex partners have been revised. At a Federal level, however, the law of superannuation is still fraught with difficulties - especially so if one is gay or lesbian and a member of a superannuation fund.. From an estate planning perspective, it is essential for gay and lesbian couples to each have a will in which they fully provide for their partner - if that is their intention - and, in spite of the tax problems that may arise, to nominate their legal personal representative as their nominated beneficiary. The reason for this is that same sex spouses in a superannuation context are not recognised under current legislation. In my view this is a form of discrimination which should be remedied by appropriate legislative reform. As outlined below, while bids have been made to reform the law, to date such reform has not occurred. D:\Docstoc\Working\pdf\813dd827-88c6-4ed5-a569-c15ee94c46a1.doc 14 The Superannuation (Entitlement of Same Sex Couples) Bill 1998 (lapsed) The Superannuation (Entitlement of Same Sex Couples) Bill 1998 was introduced into the House of Representatives in June 1998 as a private member‟s bill by Labor MP Anthony Albanese. It was subsequently introduced as a private senator‟s bill on 1 February 2000. It was referred to the Senate Select Committee which reported on 6 April 2000 and again rejected the bill in its then form. The Democrats brought considerable pressure to bear to see the bill‟s passage through parliament. In a media release issues on 24 January 2001 the Democrats Leader, Senator Meg Lees, said that the party room had resolved to pursue amendments to superannuation laws to give same sex and other interdependent couples the right to access a deceased partner‟s superannuation and death benefits. This could mean then that for example sisters or brothers or other friends living together, not only same sex couples who are in a relationship, may become eligible. As far as I am aware this proposed legislation has not been progressed. A report by the Human Rights and Equal Opportunity has recommended that the legislation be amended and has found that Australia‟s super laws breach international treaties including the International Covenant on Civil and Political Rights and 2 international conventions to which Australia is a signatory. The relevant international human rights instruments are the International Labour Organisation Discrimination (Employment and Occupation) Convention 1958 and the International Covenant on Civil and Political Rights (the “ICCPR”). These instruments are Schedules 1 and 2 respectively of the Human Rights and Equal Opportunity Commission Act 1986. The former guarantees the rights of employees to enjoy non-discriminatory terms and conditions of employment and the ICCPR guarantees a right to equal treatment. As already mentioned, the definition of spouse includes a person who, although not legally married to the person, lives with the person on a genuine domestic basis as the husband or wife of the person”.9 Currently, trustees may be risking their fund‟s complying status if a death benefit is paid to same a sex partner. (This is the converse of, for example, Canadian law where in O.P.S.E.U Pension Plan Trust Fund v Ontario, Doc. 98-CV- 157212 and relying on the anti-discrimination provisions of Canada‟s Charter of Rights, the court ordered the O.P.S.E.U to amend the definition of spouse in include same sex spouses.) Further discrimination occurs on the death of a member where there is a failure to acknowledge or investigate the dependency of a child of the same sex couple when the member contributor is not the biological parent. There is strong support from superannuation fund trustees and peak superannuation bodies such as the Australian Superannuation Funds Associations (which represents a cross section of funds), the Australian Society of Certified Practising Accountants and the Financial Planning Association. The need for reform was set out by Anthony Albanese in a speech given at a Women In Super luncheon on the 9th of August 2000. He told the story of one of his constituents, Greg Brown. I quote. “Greg and his partner and his partner Robert Corva had been in a relationship for over ten years when Robert died in 1993. At that time Robert had been employed by the Department of Defence for 17 years and was a 9 The nature of a bona fide domestic relationship has been considered with specific reference to same sex couples in case under the Family Provision Act 1982(NSW): see Ball v Newey (1988) 13 NSWLR 489; Bennery v jones (1991) 23 NSWLR 559. See also the discrimination cases: Hope v NIB Health Fund Ltd (1999) EOC 92-716 and Barclays Bank plc v O‟Brien  1 AC 180, at page 198. D:\Docstoc\Working\pdf\813dd827-88c6-4ed5-a569-c15ee94c46a1.doc 15 contributor to the Commonwealth Superannuation Scheme. After Robert‟s death, Greg was unable to gain access to his partner‟s superannuation entitlements. The case went to the Administrative Appeals Tribunal in 1995, which found that although amendments to the Superannuation Act in 1992 had removed discrimination on the grounds of marital status, this did not apply to same sex couples. Greg pursued the case to the Human Rights and Equal Commission, which in November 99 handed down its decision. The Commissioner, Chris Sidoti, in declining Greg‟s complaint, found that while Greg had been treated unequally, the discrimination was legal under current law. [The HREOC reported to parliament that Australia was in breach of the conventions as set out above] As Anthony Albanese continued: Greg has pursued his action as far as he is able under the current law. It is tragic that people still grieving for their loved ones have to take on battles such as this…This form of discrimination if simply unacceptable in 2000. Many socially progressive nations in the world have recognised same sex relationships. Countries like Sweden, Denmark, Norway, France, Hungary and Canada as well as many cities throughout the US.‟`1 “To adopt an interpretation of the statute that allowed all sexual parties, same or opposite sex, to enjoy that privilege of succession to tenancies … would be consistent not only with social justice but also with the respect accorded by modern society to those of the same sex who undertake a permanent commitment to a shared life.” Fitzpatrick v Sterling Housing Association  4 All ER 991, at 1003-4, Waite LJ in his concluding remarks. In NSW the Superannuation Legislation Amendment (Same Sex Partners) Act 2000 has been passed. This Act affects NSW Government employees only. It changes the definition of de facto partner to be the same as the one provided in section 4 of the controversial10 Property (Relationships) Act 1984 as amended at 13 July 1999 namely: 10 I say controversial because of the broad definition of persons who may be caught by this act. Encompassed are not only de facto relationships but domestic and family relationships where interdependency has occurred and can be established: see sections 4, 5 and 6. The domestic relationship definition, which I set out below, is particularly broad and facilitates access to the law to a wide range of persons who previously would not have had access to it: „5 Domestic relationships (1) For the purposes of this Act, a domestic relationship is: (a) a de facto relationship, or (b) a close personal relationship (other than a marriage or a de facto relationship) between two adult persons, whether or not related by family, who are living together, one or each of whom provides the other with domestic support and personal care. (2) For the purposes of subsection (1) (b), a close personal relationship is taken not to exist between two persons where one of them provides the other with domestic support and personal care: (a) for fee or reward, or D:\Docstoc\Working\pdf\813dd827-88c6-4ed5-a569-c15ee94c46a1.doc 16 “a relationship between two adult persons: (a) who live together as a couple, and (b) who are not married to one another or related by family” This definition has also been integrated into the definition of an eligible person under section 6 of the Family Provision Act 1982 which again increased the complexity of this area of the law especially in relation to who may fall within the class that may make a claim under the notional estate provisions of the Family Provision Act.. The Income Tax Assessment Act 1936 (“ITAA”) The definition of a de facto spouse as found in the ITAA is still discriminatory. It is defined to mean … “in relation to a person, includes another person who, although not legally married to the person, lives with the person on a bona fide domestic basis as the husband or wife of the person”. The definition of dependant in the ITAA is spouse, child under the age of 18 years or financial dependant not including same sex partners. This means that although a death benefit may be paid to a same sex partner of a NSW government employee, the benefit will not attract the same tax concessions as it would if the being paid to an opposite sex partner. The Future On 26 July 2002 the Australian Financial Review reported that at a meeting of the Standing Committee of Attorneys-General Australia's in Cairns the states foreshadowed (b) on behalf of another person or an organisation (including a government or government agency, a body corporate or a charitable or benevolent organisation). (3) A reference in this Act to a child of the parties to a domestic relationship is a reference to any of the following: (a) a child born as a result of sexual relations between the parties, (b) a child adopted by both parties, (c) where the domestic relationship is a de facto relationship between a man and a woman, a child of the woman: (i) of whom the man is the father, or (ii) of whom the man is presumed, by virtue of the Status of Children Act 1996, to be the father, except where such a presumption is rebutted, (d) a child for whose long-term welfare both parties have parental responsibility (within the meaning of the Children and Young Persons (Care and Protection) Act 1998). (4) Except as provided by section 6, a reference in this Act to a party to a domestic relationship includes a reference to a person who, whether before or after the commencement of this subsection, was a party to such a relationship.‟ D:\Docstoc\Working\pdf\813dd827-88c6-4ed5-a569-c15ee94c46a1.doc 17 another referral of constitutional power to the Commonwealth - against its wishes - that would enable Canberra to regulate property settlements between same-sex de facto couples as well as heterosexual de facto couples. Once this referral is effected, it will likely flow that other Commonwealth laws such as SIS will be amended to reflect this move. D:\Docstoc\Working\pdf\813dd827-88c6-4ed5-a569-c15ee94c46a1.doc
"Collection Fund from the Estate of a Deceased Person"