Friends versus de factos
FOLLOWING the passing of a spouse after a long marriage, it is not unusual for the survivor to develop another close friendship after a few years.
The friends may spend a lot of time together for mutual companionship, without them living together or the relationship developing further. These relationships can complicate estate planning.
While the friends may not consider themselves to be a de facto couple, after one of them dies, there may have been enough about the relationship to at least open the door for a claim against their estate.
Where the estate is substantial, children of the surviving friend may agitate for them to make a claim, overwhelming any intention to honour commitments previously made.
It is impossible to prevent somebody from making a family provision claim against an estate in these circumstances, where there was clearly some form of close personal relationship present.
There are steps that can be taken to minimise the risk, but the only way to be sure that your assets pass as you intend is to give your assets away while you are alive. This is not something we recommend though, without very careful planning.
A testamentary contract can be entered into between such friends that makes clear that neither will have a claim on the estate of the other. The contract would not prevent a friend from making a claim against the other’s estate, but it would make any such claim less likely to succeed. The disappointed beneficiaries of the estate could also counterclaim under the terms of the agreement for damages for breach of contract. While the risk of expensive litigation is ever- present where large sums of money are at stake, the contract may present a sufficient hurdle to prevent a claim from being made.
As with anything to do with estate planning, there is no one simple fix, so care and good advice is required.
Superannuation
A direction made to a super fund by a member of the fund to pay the member’s superannuation benefits to a particular person or persons on their death is generally not binding.
To make that direction binding, it must be in the form of a Binding Death Benefit Nomination ( BDBN). There are specific requirements that must be satisfied for the nomination to be binding and it only lasts three years. Not all superannuation funds allow for BDBNs in their rules.
If someone makes a BDBN and then subsequently loses the capacity to make decisions for themselves, they also lose the capacity to make or renew a BDBN. In those circumstances, can an enduring attorney appointed by them renew or make a new BDBN?
This question has recently been considered by the Queensland Supreme Court. In that case, the court considered a binding death benefit nomination that was renewed by the enduring attorneys of a superannuation fund member. The judge ruled that the extension of the BDBN by the enduring attorneys was legitimate and effective. The enduring attorney had subsequently attempted to sign a new BDBN on behalf of the person who was incapacitated, in a way that was of benefit to one of the attorneys at the expense of the other ( i. e. one of the attorneys agreed to give up her share).
The judge declined to ratify that new BDBN. This court decision suggests that enduring attorneys will be able to keep BDBNs “alive” by extending them, so they do not lapse after three years. However, making a new BDBN will be problematic, although not necessarily impossible.