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Can an executor apply for the member’s death benefit in their personal capacity?
Since a Queensland Supreme Court decision in 2014 (involving an administrator of an intestate estate, but a decision of the South Australian Supreme Court indicates that the situation is similar with an executor appointed by a will), this question has been regularly raised where there is a dispute about the distribution of the deceased’s estate. I addressed the relevant law and made suggestions about the issue in my article in the Law Society Journal of July 2019 LSJ July 2019 Estate Planning For Superannuation Death Benefits
The essential problem is the clash of fiduciary duty owed by the executor to bring a claim on behalf of the estate which the executor administers, and the personal interests of the executor to obtain the claim for her or himself.
The issue arose again in Labriola -v- Kuntyj [2021] WASC 375. The facts involved a slight variation on previous decisions because the claim was made by the deceased’s spouse (who was also the deceased’s executor) on a self-managed superannuation fund where the executor had become the decision-maker concerning the claim.
The member of the fund was Bohdan Kuntyj. The self-managed superannuation fund was Bohdan Superannuation Fund. Prior to his death Bohdan was the sole director of the trustee of the fund, Bohdan Holdings Pty Ltd. Following his death, his executor, his wife Lynda, appointed herself as the director of the trustee and arranged for the death benefit of $2.3 million to be paid to her. The member’s daughter, Jennifer, alleged that the executor acted in breach of her fiduciary duty and should have paid the death benefit to the estate. The executor brought an application for summary judgment, which was dismissed.
The court’s reasons are relatively brief and don’t canvass the relevant facts in detail. However it is likely that the daughter’s dispute was brought because she would receive some or all of the death benefit if it had been paid to the estate.
In my July 2019 article I referred to five situations where the problem could be avoided. The first is where there is only one potential recipient of the death benefit, whether paid directly or through the estate. The second requires the member to be proactive by making a valid binding nomination. The third is where the member is in a fund which does not confer a discretion on payment on the trustee of the fund, such as some statutory funds. The fourth also requires the member to be active before death. This involves the member making a will which gives express authority to the executor to act in his or her own interests by applying to receive the death benefit.
Of course, the dispute usually arises because the member hasn’t thought about the potential problem, or how to resolve it, in advance. Where the member hasn’t addressed the problem during life, the court decisions appear to be clear. To avoid the problem the prospective executor must renounce executorship (or, possibly, although this is not recommended, not apply for a grant) or, if a grant has been made, seek revocation of the grant. What does this mean for Lynda Bohdan? Time will tell but I expect the result will be similar to that in the original decision of McIntosh v McIntosh [2014] QSC 99 where there was an order that the death benefit be disgorged to the estate.
