LGBTIQ+ couples: how to make sure your partner inherits your Super benefits
People in an LGBTIQ+ relationship may face unique problems when trying to make sure their partner will be the recipient of their Superannuation entitlements in the event of death.
Superannuation Death Benefits, in particular, can be complex and difficult to claim where there is no legal marriage and the relationship between the couple has to be proven to the satisfaction of the Super Fund in question.
In this blog, I explain the criteria that must be satisfied by a domestic partner claiming on a deceased partner’s superannuation death benefit, and how best to legally ensure that your partner will be the beneficiary of your Super entitlements.
First, I need to explain some background.
Superannuation Death Benefits
If you have superannuation when you die, a superannuation death benefit will be payable by your superannuation fund. Superannuation death benefits can consist of existing pension entitlements, your account balance and life insurance proceeds if you have a life insurance policy attached to your account. Your account balance consists of the amounts paid in by your employer together with any voluntary contributions you may have made.
It is not uncommon for people to have multiple superannuation funds as a result of having worked different jobs over time and many people have life insurance policies through their super funds that they aren’t even aware of. This is because most superannuation funds automatically take out life insurance policies on behalf of members.
The combined value of the superannuation account balance and life insurance proceeds is referred to a death benefit. This can be paid by way of annuities or reversionary pensions however, are most commonly paid in lump sums upon the death of the member and is often a sizeable amount. The distribution of this amount is not necessarily governed by your Will. Upon the death of a member, the Trustee of the superannuation fund must pay a death benefit in accordance with the legislation and the fund’s rules.
In the absence of a valid Binding Death Benefit Nomination, the distribution of the death benefit is at the discretion of the Trustee, within certain parameters.
Binding Death Benefit Nominations vs Non-Binding Death Benefit Nominations
When understanding nominations, it is important to note the distinction between a binding nomination and a non-binding nomination and to ensure the right approach is taken for your specific needs.
A nomination, binding or non-binding, sets out to whom you wish your death benefit (superannuation account balance and insured benefit if any) to be paid, and in what proportions.
A non-binding death benefit nomination informs your Trustee of how you would like to see your superannuation distributed. These instructions are not binding on the Trustee. The Trustee will take your nomination into consideration however, the decision of how to distribute the funds ultimately rests at the Trustee’s discretion. The Trustee must also consider the needs of the dependents of the deceased member and determine how best to apply the funds in accordance with the Superannuation Industry (Supervision) Regulations 1994 (‘SIS Regulations’).
If you have a valid Binding Death Benefit Nomination in place, the Trustee is bound by your nomination and distribute the death benefit accordingly.
However, it is important to note two things. First, not all superannuation funds will permit the making of a binding nomination. Second, the SIS Regulations restrict the persons to whom a fund can pay all or part of a death benefit.
For a death benefit nomination to be valid, only eligible beneficiaries under the SIS Regulations can be listed.
Who is eligible to benefit from your superannuation?
In accordance with Regulation 6.22 of the SIS Regulations, a fund may only pay a death benefit to either or both of:
- the member’s Legal Personal Representative (i.e. the Executor or Administrator of the member’s Estate); or
- one or more of the member’s dependants.
Accordingly, the only people who can receive money from your superannuation after you die are:
a. your spouse, de facto spouse or domestic partner including same-sex partner;
b. your children, including step-children and adopted children;
c. anyone wholly or partially financially dependent upon you at the time of your death;
d. anyone deemed to be in an interdependent relationship with you at the time of your death; or
e. your estate.
What does Regulation 6.22 mean for LGBTIQ+ domestic partners?
While the term ‘spouse’ extends to include domestic partners, in the absence of a marriage certificate the Superannuation Fund must be satisfied that the claimant and the deceased were living together on a genuine domestic basis in a relationship as a couple. This means the Superannuation Fund must look to other evidence to substantiate claims of a relationship.
For this reason, the claims process for domestic partners can be onerous and oftentimes intrusive.
In order to demonstrate to the fund that a genuine relationship existed, domestic partners are asked to evidence a degree of dependency or interdependency with the deceased at the time of death. It is very difficult to prove the existence of a genuine domestic relationship without also proving interdependency.
A dependent partner is a domestic partner who was wholly or partially financially dependent on the deceased at the time of death. To be eligible to make a claim, a domestic partner must fit within this legal definition.
The SIS Regulations provide that two persons will be deemed to have had an interdependent relationship if:
- they have a close personal relationship; and
- they live together; and
- one or each of them provides the other with financial support; and
- one or each of them provides the other with domestic support and personal care.
The SIS Regulations do however provide a caveat on the ‘living together’ requirement, whereby an interdependent relationship will be taken to have existed where the parties temporarily lived apart, or if one or both of the parties suffer from a physical, intellectual or psychiatric disability.
In a comprehensive application, extensive evidence should be produced to the Trustee to satisfy the criteria mentioned above. Examples of such evidence include:
a. sworn statements from friends and family saying that they observed the couple and understood them to be in a close personal relationship;
b. evidence of jointly held assets and liabilities such as bank statements or property title searches;
c. rates and utility invoices addressed to both parties at the same address;
d. tax returns showing relationship status; and
e. other miscellaneous evidence such as joint invitations to weddings or other like events, Christmas cards addressed to the couple, or other government records evidencing the relationship.
Going through this process is understandably an additional stress when also having to deal with grief.
As previously mentioned, sworn statements of friends and family members can serve as crucial evidence of the close personal relationship. These statements speak to the public perception of the couple and to the legitimacy of the relationship.
In some instances, however, it can be harder to prove the existence of an LGBTIQ+ relationship than an equivalent heterosexual relationship.
An example of a hurdle often faced by LGBTIQ+ claimants is when family members do not accept or acknowledge the relationship. Family members of the deceased who resent the relationship can often make life hard for the surviving partner. This can make it difficult to obtain supporting statements and can also result in competing claims from family members of the deceased.
Legal advice for domestic partners claiming on Superannuation Death Benefits
Strictly speaking, there is no ‘one size fits all approach’. This is because each person’s circumstances and estate planning requirements are different. For this reason, it’s important to engage a Wills and Estates solicitor to advise you on how best to structure your superannuation as part of your broader Estate Plan.
One way of ensuring superannuation is specifically directed to a domestic partner is by way of a Binding Death Benefit Nomination. This can be done by nominating your partner expressly, or by nominating your Legal Personal Representative.
By nominating your Legal Personal Representative, the death benefit would be paid into your Estate and the funds would be distributed in accordance with your Will. You could then gift your superannuation to your partner in your Will. By doing so, your partner would not be required to provide any evidence of the relationship to the Superannuation Fund, making the process far less burdensome.
However, it’s important to obtain legal advice before deciding how best to funnel funds to your partner.
As an example, if there is a risk your Will may be contested, it may be preferable to nominate your domestic partner directly to avoid the funds forming part of your Estate and becoming available to a claim. Your Wills and Estates solicitor will be best placed to offer this tailored advice.