When meeting with clients to discuss their estate planning, superannuation is a big part of the conversation for many. Afterall, it is often where a significant portion of their wealth lies.
It is also an area of the law, where despite the vastness of the wealth, there is a lot of confusion about how superannuation is dealt with on death. This is unsurprising though, given the seemingly constant changes to the law.
Frequently, our discussions with clients involve education that their superannuation is not automatically dealt with under their Will, and (typically) the need to have the correct nomination in place to direct the trustee of the superannuation fund as to how to deal with their superannuation on death.
But what is the ‘correct nomination’? Is a non-binding nomination enough?
The recent case of Lynn v Australian Financial Complaints Authority [2025] FCA 175 is a cautionary tale of circumstances where the deceased’s non-binding nomination in favour of his children and stepchildren, for his industry-fund super, was more-or-less disregarded in a dispute between the deceased’s children, stepchildren and his spouse, from whom he was separated at his death.
In this case, the Federal Court sided with the children of the deceased superannuation fund member over his estranged wife, in a dispute over the distribution of his superannuation benefits years after his death. The Federal Court supported the decision of the Australian Financial Complaints Authority (AFCA), which overturned the super fund’s previous decision to give 100% of the deceased’s superannuation benefit to his estranged wife, despite having a non-binding death benefit nomination in place.
What happened?
- The late Mr Lynn had four daughters and two stepsons, who were the children of his estranged wife, Ms Lynn.
- Mr Lynn and Ms Lynn married in 2007, but their separation and divorce proceedings were ongoing, followed by family violence intervention orders by each against the other. At the time of his death in December 2021, the pair were still legally married, despite living a part for the six years prior.
- In 2018, Mr Lynn had made a non-binding death benefit nomination (non-BDBN) that excluded Ms Lynn and instead listed his children and stepchildren as intended recipients.
- In 2019, Mr Lynn had executed a will leaving his estate to Ms Lynn which in 2021, he asked his lawyers to update for his four daughters as equal beneficiaries instead. The request was not completed at the time of his death.
- Following Mr Lynn’s death, Ms Lynn disputed his non-BDBN and sought to claim the full super benefit herself.
AustralianSuper’s decision
- The trustee of Mr Lynn’s industry super fund decided to distribute 100% of Mr Lynn’s super benefits to her, ignoring his non-BDBN.
- Mr Lynn’s daughters then complained to AFCA, basing their argument that the allocation was unfair.
AFCA decision
- AFCA decided differently. It decided to split the superannuation benefit, distributing 50% to Ms Lynn and 50% divided equally amongst the six children.
- Unlike AustralianSuper, AFCA did actually consider the deceased’s non-BDBN even though it is not legally enforceable. The AFCA considered the deceased’s intentions according to the non-BDBN and used it to guide their decision.
- Ms Lynn then appealed to the Federal Court.
Federal Court decision
- The Federal Court ultimately decided in support of AFCA’s decision.
What can we take away from this decision?
- Is there any purpose of a non-BDBN? Seemingly no. It was ignored by the super fund, and while it was considered by AFCA, it was not ultimately a deciding factor.
- Don’t leave it until it’s too late: Have well-prepared and up-to-date estate planning documents, including making binding death benefit nomination as part of your estate planning, and keep this in mind when separating.
- Ensure that we have appropriate nominations in place: To reduce the risk of the benefit going against the deceased’s intentions, a valid BDBN – as opposed to a non-BDBN and subject to the terms of the fund’s rules – trustee would be bound to follow the deceased’s directions (save for some exceptions typically provided for in an industry/retail fund deed, such as a significant change to the member’s personal circumstances).
- Superannuation and family law: Despite having issued family law court proceedings for a property settlement, followed by a reconciliation and further separation, the property settlement was never finalised. Throughout these ongoing separation proceedings, Mr Lynn did not update his non-BDBN or execute a binding death benefit nomination; a timely reminder that a prompt from either his estate planning or family lawyer to do so and the importance of formally finalising a property settlement soon after separation, could have avoided the dispute.
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Disclaimer: This article provides general information only and is not intended to constitute legal advice. You should seek legal advice regarding the application of the law to you or your organisation.