Conflicts continue to arise between executors, trustees and potential beneficiaries regarding claims for death benefits where no valid superannuation binding death benefit nomination exists.
The recent decision of Brine v Carter is another example of such conflict, and highlights where an executor may be at risk of breaching their duty. Ms Carter was a co-executor of her domestic partner, Professor Brine’s estate, (the deceased), and the beneficiary of a life interest under his Will. The deceased’s three sons from a previous marriage were the other executors, and residuary beneficiaries under the deceased’s Will.
Ms Carter applied for the deceased’s death benefits to be paid directly to her from his superannuation funds (the Fund). Ms Carter did not initially inform her co-executors that they, and the estate, could make competing claims for the benefits. Once the sons became aware, they applied for the benefits to be paid to the estate. The trustee of the Fund exercised its discretion in favour of Ms Carter, paying her $630,299 directly.
The sons argued that Ms Carter, as executor, breached her fiduciary duties in claiming and receiving the superannuation benefits in a personal capacity. A fiduciary is said to be under an obligation not to pursue a personal benefit in conflict with the estate, unless authorised by the Will or with consent of the beneficiaries.
Ms Carter argued that as the deceased appointed her as an executor, there was consent for her to act in a conflicted role and pursue a personal benefit. The court did not agree with her.
However, the court found that once the sons were aware of their potential to make a claim, yet allowed Ms Carter to pursue hers, without resigning as executor, they had consented to her doing so. On this reasoning there was no breach of her fiduciary duty, and Ms Carter was not liable to account to the estate for the superannuation benefits she received. However, it is important to note that if the sons had not been aware of their rights, and had not made a claim, Ms Carter would have been in breach and liable to account.
This case is a reminder to will makers to understand the nature of their wealth, understand potential conflicts and to be careful in selecting an executor. It also a warning to an executor who wishes to make a personal claim for death benefits that they risk breaching their duty.
Finally, to reduce possible family and other conflicts it is important to seek proper advice. We have an experienced estates, superannuation and taxation team available to advise on such issues.