Brine v Carter
The facts of the case are as follows:
- The deceased – Professor Brine – was in a de facto relationship with Ms Carter when he passed away. His Will named Ms Carter, along with his three adult sons from a previous relationship, as joint Executors of his Estate.
- In his Will Professor Brine made some specific bequests to Ms Carter, but left the balance of his Estate equally to his three sons.
- Professor Brine had two superannuation accounts with UniSuper. One account was structured so that the only beneficiary of that superannuation could be a spouse. The second was an accumulation account from which a spouse, child, dependant or the member’s Estate could benefit.
- Rather than making a binding nomination in his Estate Plan, Professor Brine had written to UniSuper expressing his wish for the beneficiary of his superannuation to be his Estate. This was recorded with UniSuper however, given the form it was in, was not enforceable.
- Ms Carter learnt of the two superannuation accounts following Professor Brine’s death, and made applications to UniSuper to have the balance of each account paid directly to her.
- When Ms Carter reported the existence of the superannuation to the other Executors, she was vague in identifying that there were two accounts and told the other Executors that the only beneficiaries could be a spouse, children under the age of 18 or another dependent. Ms Carter requested statutory declarations from the other Executors that they did not fall within these categories and that they supported her application that the superannuation entitlements to be paid directly to her.
- Approximately two months later, UniSuper had not yet paid out the superannuation entitlements and the Executors had not completed statutory declarations, as they held concerns regarding the information they were being told. One of the other Executors (Professor Brine’s son) contacted UniSuper directly. He learnt of the two superannuation accounts and had it confirmed that Ms Carter was the only possible beneficiary of the first account, however a beneficiary of the second account could be he and his brothers or his father’s Estate.
- All four Executors met and agreed that Ms Carter could continue with her application to have the superannuation entitlements paid to her personally, however the other Executors would make a similar application to UniSuper requesting the superannuation entitlements be paid to the Estate. They agreed that Ms Carter would not act as Executor of the Estate in the new application as her personal interests were in conflict with the Estate’s.
- Once in receipt of the two applications, UniSuper exercised its discretion to pay the accumulation portion of the superannuation to Ms Carter and not to the Estate.
The court’s decision
When this matter was brought before the court, it looked at a number of issues:
- Whether Ms Carter had breached her duty as an Executor because she petitioned UniSuper to pay the entitlements to her personally, rather than to the Estate.
- Whether Ms Carter had misled the other Executors in their understanding of the superannuation and its potential beneficiaries.
As all of the Executors became aware of the existence and structure of the superannuation, and had the opportunity to petition UniSuper to have Professor Brine’s superannuation entitlements paid to the Estate before UniSuper exercised its discretion and made a determination to pay the superannuation entitlements to Ms Carter, the court held that Ms Carter was not in breach of her duties as an Executor.
The court also noted that if a provision had been included in Professor Brine’s Will giving Ms Carter the authority to apply for his superannuation entitlements personally, whilst maintaining her position as an Executor of his Estate, the issue of a conflict of interest would not have arisen.
What does this mean for you?
Estate Planning is about protecting your hard-earned assets as well as the interests of your intended beneficiaries. If you are looking to appoint an Executor who is also a beneficiary of your Estate or a non Estate asset, such as your superannuation, it is important to understand the legal consequences of the appointment as well as the fiduciary obligations that the Executor has to the Estate and beneficiaries.
Where a conflict of interest is identified, the Estate Planning documents will need to deal with this potential conflict. This can be done by:
- Making a specific statement in the Estate Planning documentation that you are aware of the potential conflict of interest, however it is your intention that the Executor act in their own interests to gain personally from the Estate and/or superannuation.
- Ensuring that you have a binding nomination in place with respect to your superannuation entitlements to try and reduce the instance where a conflict may arise.
- Ensuring the governing rules of your SMSF allow the trustee to act for their own benefit in circumstances where they are required to exercise a discretion.
As with other aspects of Estate Planning, it is important that the intended beneficiaries are aware of the directions a Will maker has made regarding their superannuation entitlements. This will help avoid conflicts between beneficiaries and disappointed beneficiaries after the member has passed away.
Contact our team to have a conversation about planning to protect your assets, identifying potential conflicts of interest, and ensuring your wishes are appropriately upheld. You can phone us on 07 3223 6100 or email Emily O’Brien at firstname.lastname@example.org.