27 April 2018
The super disadvantage: de factos and death benefits
A spouse, whether married or de facto, is the most logical inheritor of their partner’s superannuation benefits, once they die.
The trustee of a super fund has the legal responsibility to pay that benefit to the deceased super fund member’s dependent, which includes a spouse, or legal personal representative.
But for de facto spouses, sometimes it’s just not that straightforward.
What does the law say?
A spouse who is legally married to the member, only needs to prove the marriage, usually by providing a marriage certificate (if necessary). If married to the member, they are a dependant.
To qualify as a ‘de facto’ spouse, the person needs to prove that at the time of the member’s death they lived with them on a genuine domestic basis in a relationship as a couple. The length of time in the relationship isn’t the critical factor, merely that it existed at the time of the member’s death. However, the duration of the relationship would be a relevant consideration in a trustee’s determination.
So, the trustee must consider the nature of the relationship to determine whether a de facto relationship exists. In contrast, for a spouse who is married to the member, the nature of the relationship is unlikely to be called into question.
(Alternatively, outside of their status as a partner, a de facto spouse may qualify as a dependant if they can prove they are financially dependent on the member or are in an interdependency relationship with the member.)
Proving existence of a de facto relationship
Although trust deed provisions and requirements for evidence may differ according to the super fund, the trustee has to consider a wide variety of factors relating to the particular relationship, to determine whether a de facto relationship actually exists.
These include but are not limited to:
De facto partners super benefit case studies
The following cases illustrate the difficulties in proving that a de facto relationship exists in certain situations.
Case study 1: Despite undisputed evidence that a de facto relationship existed for three to five years, the de facto spouse’s claims were rejected and the trustee exercised discretion to pay 100 per cent of the benefit to the legal personal representative instead. The deceased member had not nominated a preferred beneficiary nor left a will and the benefit would have formed part of the estate.
This case highlights the potential hurdles faced by a de facto spouse in proving their claim as a dependant. Both parties in the dispute presented equal conflicting evidence of the existence or termination of the relationship.
Case study 2: In a case before the Superannuation Complaints Tribunal, a dispute arose as to whether a de facto spouse was living with the deceased on a genuine domestic basis in a relationship as a couple at the time death. The member had moved into an aged-care facility one month before his death and spent the last two weeks of his life in hospital.
The fact that a genuine de facto relationship had existed for more than 10 years was not in dispute. The dispute was whether that de facto relationship still existed at the time of the member’s death due the couple living apart.
Does living together as a couple show dependency?
Proving that a couple live together may seem relatively straight forward. However, commonly in situations where disputes arise, the evidence of the competing parties may conflict.
Proof-of-living arrangements may be complicated where, for example, the member has mail delivered to a different residential address, a lease was in one person’s name or the member died while in an aged-care facility or hospital, as one of the above case studies shows.
Generally, objective evidence by independent parties may be of greater value than evidence of the de facto spouse (and their friends or relatives) which may be considered self-supporting and therefore of lesser value.
Registered relationships: a third way for de factos
Another possible option may be for the couple to register their relationship within their state/territory. The trustee should acknowledge someone in a registered relationship as the spouse of that person.
There may be many reasons why a couple will or won’t marry, but it may be worth alerting clients to the fact that marrying can avoid some of the obstacles of proving that a de facto relationship exists under current superannuation law.
Marriage, as formal recognition of the relationship, may reduce the risk of claims by competing interests, by alleviating any doubts that the couple were mutually committed to a shared life together.
Claudine Siou is a technical services manager at OnePath.
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