The problem with death (another one) and your superannuation

A macabre thought. Imagine (apart from being a great Dad and valued husband) you are the sole breadwinner for your family of five. Imagine one day, (and contrary to your reasonable hope or expectation of the standard 84 odd years) you drop dead suddenly. What happens now? What sort of expectations would you have about the manner in which various organisations who have happily taken your money over the years (banks, superannuation funds and so forth) and whom you have trusted to manage your assets would act to support your loved ones?

In the immediate aftermath, apart from the profound fog of grief and loss that now permeates your loved ones’ existence, there are now the pragmatic realities of keeping families clothed, fed and emotionally supported. Perhaps your family are also facing the following immediate issues:

  • Bank accounts in your sole name are now frozen. Maybe this includes the account your wife was depending on to pay for your family’s daily expenses (groceries, school uniforms);
  • our credit card is also frozen. Although your wife has a card, owing to the fact that you were the primary cardholder, her card is cut off, together with this line of credit;
  • Your family is handed a $10,000.00 bill for your funeral with payment terms of 30 days;
  • Your wife goes to the bank and some random employee (because in spite of the glossy ads, many of the banks don’t actually “do” relationships anymore) hand her an inch-thick wad of paperwork to complete with an incomprehensible list of documentary requirements. She is the lucky one, having had “human” interaction. God help anyone who has actually had to deal directly with the “Deceased Estates” team of a major bank (think of a six-month episode of the banking version of “Utopia”).

Well, you might say, there is always my healthy superannuation balance, and a nice life insurance policy I have been paying for within in so that in the event of my untimely death my family will be “well provided for,” right? Wrong!

It’s not that your wife/family won’t receive your superannuation death benefits and even your bank account proceeds. Eventually.

What is extremely troubling as an estates legal practitioner, is the increasing delays and obstructions encountered by grieving families in securing the timely release of their loved one’s superannuation in particular at their time of most pressing financial need and distress. This is exacerbated by the fact that in many cases, the only major asset of value associated with a deceased person is a superannuation death benefit.

If you speak to superannuation funds, they will tell you it’s just not their fault. The problem is “the law”. Superannuation does not necessarily form part of a deceased’s person’s estate. The categories of people who can make a claim on superannuation directly are peculiarly broad and extend to people living together and providing one-another with domestic and/or financial support.

Think of the practical application of these laws. Two elderly sisters living together (they cook and clean, maybe the wealthier of the two pay bills for the other), two friends sharing a house on a long-term basis, a same-sex couple who most certainly have a shared commitment to a mutual life together but perhaps not always an immediate family with direct knowledge of the relationship, a man maintaining his mistress and illegitimate child without the knowledge of his legal wife.

Then you have a superannuation claims officer sitting in an office somewhere who has absolutely zero knowledge of its deceased’s members domestic circumstances. It is very clear to all estates practitioners and claimants that superannuation funds are skittish about paying out. In fact they are terrified. Who knows what kinds of eligible “skeletons” might rear their heads to stake their claim. What if they pay the wrong person?

The institutional response to the kind of relational ambiguity that pervades the current age is simply to swamp the grieving family with a truckload of paperwork and sometimes offensively intimate questions about their relationship with the deceased. Outsource risk.

The claims process might frequently include a widow/widower having to go about procuring statutory declarations from their spouse’s friends or workmates attesting to their relational status with the deceased (to whom they have been married to for thirty years) and superannuation funds requiring adult and financially independent children to “consent” to one parent receiving the superannuation death benefit of the other.

How do we insulate grieving people from the stress and complexity of our own laws?

I have some ideas. Please think about them and seek advice:

  • Have a valid will. Please. If you can afford an iphone then I have no doubt you can afford to take all necessary steps to seek advice and execute an effective will. Also ensure you have an enduring power of attorney in place in case you are alive but incapacitated (a will won’t help in this event).

    It is also important to be frank about with your lawyer about your relational issues as these will have a direct impact on the ease with which your estate can be managed in the event of your untimely death.

  • Have a death benefits nomination for your superannuation that is consistent with your will (even if superannuation doesn’t form part of your estate, it’s powerful evidence of your intentions). Ensure you renew this nomination form with your superannuation fund every three years (you can generally download them from the internet site of your superannuation fund).
  • If you are married, consider the advantages of owning assets you would like to pass to your spouse jointly (house, bank accounts). In the event of your untimely death, any monies in joint bank accounts with your spouse (or for that matter, any other person who depends on you) will pass automatically by survivorship (same with your home).
  • Speak to a good insurance broker. I am not one but in my limited experience, life insurance policies held outside of the superannuation environment with a nominated beneficiary and funeral insurance policies seem to pay out more quickly.

It would also be great to see some broader debate about the possibility of legislative reform in this area (particularly as regards who can claim and when) and/or some navel gazing within the superannuation industry about how they can make their claim processes more efficient and compassionate.

A radical idea, but perhaps superannuation funds might even consider engaging with their members during their lifetime and therefore displacing the relational disclosure obligations periodically onto members whilst alive. This might go some way towards helping families navigate the claims nightmares and providing some clarity for the funds.