Superannuation has traditionally been thought of as lying outside of an estate and therefore outside the grasp of people applying for provision, especially where there is a binding death nomination. However, in the recent decision in Benz v Armstrong [2022] NSWSC 534 (the Benz Decision), the Court confirmed that superannuation could be brought into estate under the notional estate provisions of the Succession Act 2006 [NSW] (the Act).
Background
Dr William Benz and his wife, Gwenneth, also a medical doctor, owned a medical practice at Bondi Junction, as well as a number of residential properties. The couple had six [6] children who all attended private schools. All was going well with the family until Dr Benz, then aged 47, met Erlita Armstrong, 21, who was working as an assistant at her husband’s service station in Woollahra. The couple began a secret relationship which lasted for 15 years, until Gwenneth discovered their affair. Erlita was a migrant from the Philippines who was married to a Woollahra service station owner. Arguably, Erlita could be described as a ‘gold digger’.
Gwenneth kept her marriage, and the family, together, until she suffered a fall at the family home in 2010. She was moved to a nursing home and Dr Benz and Erlita began living together. Gwenneth died in 2011. A little over a year later, Dr Benz and Erlita got married.
The Will and Estate
- Dr Benz, who died on 5 April 2019, was survived by his six [6] children (from his first marriage), his second wife (Erlita) and a stepdaughter (Erlita’s daughter from her service station days).
- Dr Benz left Erlita several properties – the family home in Wahroonga, his Bondi Junction surgery, homes in Centennial Park and Pymble – several cars, an extensive art collection and shares worth several million dollars.
- In his last Will dated 13 September 2012 [Will], Dr Benz left the residue of his estate to his children.
- However, Dr Benz had structured his affairs and estate so that there would be no residue left in the estate to distribute to his children, including:
- Signing a Binding Death Nomination on 12 May 2016 in favour of Erlita in relation to his superannuation;
- Holding a number of properties jointly with Erlita; and
- In January 2019, transferring shares in NAB and Westpac worth about $1.1 million to Erlita.
Proceedings were commenced by 4 of Dr Benz’s 6 children seeking further provision from the estate.
Key Issues – Notional Estate
In NSW, property can be designated notional estate by the Court where a deceased person either took steps that resulted in property no longer being available to their estate or failed to take steps that were available to them that would have made property available to their estate in the three [3] years before their death. This provision is peculiar in NSW and does not appear in the succession legislation in other states. As there was no residue in the Estate, the court had to consider whether it could tap into the notional estate, a significant portion of which was in superannuation.
Cheese or Jam
It was accepted by the parties that none of Dr Benz’s children were destitute. The children argued that they were owed not only the ‘bread and butter of life’ but “a little of the cheese or jam” too.
Justice Julie Ward agreed: “It seems extraordinary to think that Dr Benz would have intended his children to obtain nothing at al from his very large estate. Erlita had obtained substantial wealth in Dr Benz’s life and after his death. I consider Erlita was prone to exaggeration and I treat with some caution her protestation of devotion and her denials of controlling behaviour.”
The Court decided that:
- Superannuation formed part of Dr Benz’s notional estate.
- The children were awarded varying amounts from $900,000 to $1.9 million plus their costs.
Lessons Learned From The Case
It’s fairly common that a couple will leave their estate to their partner, with the assets then going equally to the children upon the death of the last couple.
Usually, a Court will not interfere with a binding death nomination in a superannuation fund, but under New South Wales law, the judge was able to do so and dipped into the superannuation fund to award money to the children who sued the estate.
The moral of the story is that if you want to leave unequal amounts to your partner or children in your Will, it’s advisable to clearly explain in the Will why you are doing so. For example, you may have given a child a substantial gift during your lifetime [such as, shares or a house], or you may have been estranged from a child and have not had contact for years.
RN LEGAL is experienced in bringing claims against estates for provision under the Succession Act 2006 [NSW] and defending claims on behalf of the estate/executor. If you or someone you know who requires assistance with an estate matter, please contact RN LEGAL on [02] 9191 9293 or mail@rnlegal.org.