A case that has recently come within public scrutiny deals with the binding death benefit nomination. It talks about how the present trustees (adult daughters) and former trustee (second wife) are battling over the estate and coming to grips with the exorbitant legal bills.
The case of Binding Death Benefit Nomination
There is a clear disagreement between the adult daughters of Maxwell Morris, the deceased, and his second wife over who should be paying the legal bills and to whom the reins of the state shall be passed over. All the interests of the Morris Family Super Fund were passed over by late Mr. Maxwell to his adult daughters from his first marriage. This was done via a Binding death benefit nomination.
Supreme Court of Victoria rules
The decision was challenged by the deceased’s second wife, the sole director of the corporate trusteeship at the time of the demise. The court upheld the challenge and facilitated the road for payment of nearly $1.2 million to the adult daughters.
Exorbitant legal bills
There is a problem though. The corporate trustee (second wife) has been replaced from her position since by the replacement trustees (daughters) but the asset base of the estate has been highly depleted in paying legal bills. The bills are in the vicinity of $370,000. As a silver lining for the daughters, the Supreme Court of Victoria has passed a judgment that the legal bills can be disputed.
The case clearly lends itself to public scrutiny. Experts will flex some muscles over the latest developments, too. Soon, we will feel a need to revisit the clauses of the binding death benefit nomination.
Lessons for SME owners
There are important lessons to be had for the SME owners. In a gist they are:
- SME owners must seek professional help when it comes to planning the succession of their estate and also discuss the veracity of the binding death benefit nomination they make and the beneficiaries they declare. Imagine, would the case have turned out so drastically if the adult daughters (declared as beneficiaries in the binding death benefit nomination) were also the trustees of the SMSF at the time of the demise of Mr. Maxwell?
- SME owners should sit with their whole family over a group-gathering and pre-declare their intent rather than creating grounds for nasty surprises. It may also be useful to foster healthy relationships within the family.
- Family of the deceased must aim to avoid litigation expenses and attempt out of court settlement.