Claiming super and insurance benefits after the death of a loved one is usually relatively straightforward. Usually, you simply complete claim forms identifying yourself and detailing your relationship with the deceased and proving that they have died. If your relationship with the deceased is clear and not controversial (e.g., you are the deceased’s husband or wife), the benefit will usually be paid reasonably quickly, as long as no one else makes a claim and there are no issues with the circumstances of death.
However, what happens when things are not straightforward with a death benefits claim? What happens in split families or if the deceased had children from a current and earlier relationship that all rely on them for support?
In this blog, we will look at what can be done when you are not happy with the decision of a super fund relating to the payment of a death benefit.
How do super death benefit claims work?
When someone dies and leaves a superannuation account, the rules of the super fund decide who is paid the remaining superannuation account balance (the money which is left over in the account).
Also, the deceased person may have an insurance policy held in this super account that pays a life insurance benefit. This benefit will be paid into the super account and will be paid out with the left-over superannuation account balance, in addition to any death insurance benefit which is held outside super.
The super fund rules relating to paying out death benefits are complicated and covered in detail in our earlier blog, “A guide to super death benefit claims." Completing death benefit nominations, particularly binding nominations, can help to create some certainty, but care must be taken to make sure that they are completed properly and are made in favour of your dependents or your Estate, or they may fail.
How are super death benefit decisions made after a claim is lodged?
If a super fund makes a decision regarding a death benefit claim that you are not happy with, you have appeal options. Disputes and challenges against super fund decisions about the payment of super death benefits usually happen because:
- you are not paid any of the money; or
- you are paid less (usually as a percentage) than you think you should; or
- you are paid the money as a Trustee for your children as their guardian, which means there are restrictions about what you can do with the money;
- the super fund decides to pay the money to the deceased Estate (to be distributed in accordance with the Will or the relevant laws if you don’t have a Will), which you don’t agree with because there is no Estate and you don’t want to incur the expense of creating one.
All of the above, and any other decision relating to the payment of a death benefit, can be challenged internally to the super fund directly. Challenges can also be made to the Australian Financial Complaints Authority (AFCA) and in Court.
The decision-making process when considering a death benefit claim
As outlined above, when a super fund member dies, the deceased’s loved ones can claim to be paid the benefits (the remaining funds in the super account and any death benefit). In response to these claims, the super fund will make a decision about who to pay the superannuation account balance (including any successful death insurance benefit) to.
If more than one person claims the benefit, the super fund must decide under its rules who to pay the benefit to. It may, for example, pay the whole benefit to one of the claimants and none to another, or it may pay the benefit 50% to each. Or it may decide that none of the claimants are entitled to the benefit and decide to pay the money to the deceased Estate. It may make a decision to pay to the Estate even if there is no Estate. This means that if no Estate is ever created, eventually the Government will receive the benefits.
No matter what decision is made, the super fund must advise all interested parties (sometimes this even includes people who haven’t made a claim) and allow everyone 28 days to object to the decision before paying out the money. This is called the “claims staking” period.
All interested persons can object to the decision during this time period.
Internal objections to decisions made by the super fund
If an objection is made during this initial claim staking period (28 days), it will then be considered internally by the super fund, and the fund will decide to either affirm the original decision or make a new decision.
If an objection is received, all parties should be advised of the objection and more information can be provided by all parties either in support of the original decision or any other decision which the parties seek. After considering all of the relevant materials and information, the super fund will then make a second or review decision about how the super fund money should be paid out.
As with the initial decision, the super fund should advise all of the interested parties of this review decision and a further 28-day claim staking period is provided to allow any objections on the review decision.
If the super fund doesn’t advise all parties of the decision and give the appropriate amount of time to object, it can be liable to repay any money that it pays out prematurely if its decision is found to be wrong.
External objections to the Australian Financial Complaints Authority
Objections about second decisions or review decisions made by the super fund are made to AFCA and must be made within 28 days of being advised of the review decision.
AFCA has a broad decision-making power about death claims and is able to make a new decision which replaces the super fund’s decision about the distribution of the super fund benefit if it finds that the decision is unfair and unreasonable.
The AFCA process relating to death claims is usually similar to that relating to other complaints to AFCA, which is covered in our blog, “AFCA complaints against superannuation funds and insurers.”
In summary, a complaint to AFCA about a death benefit decision will usually proceed as follows:
- Initial complaint lodged by the unhappy or disputing claimant (the AFCA complainant).
- The super fund and all other claimants are advised of the complaint and invited to join. Technically, the claim is against the super fund because it’s the super fund’s decision which is being complained about. However, other claimants with an interest in the outcome of the complaint can be involved in the complaint. They are usually called “joined parties”.
- All of the parties (AFCA complainant, super fund and joined parties) will be given the chance to review each of the others’ claim forms and other documents submitted when they made the claim and make submissions about those documents, including giving new evidence in support of their preferred outcome. This is usually the first time that the documents about the complaint are shared. Prior to this, the super fund will not allow these documents to be exchanged for privacy reasons.
- The parties will be invited to attend a telephone conciliation conference to discuss the claims and complaint and try to resolve the matter. Sometimes, complainants and joined parties can reach settlements with each other at these conferences and resolve the complaint. Usually, the super fund must sign off on the compromise.
- If the complaint is not resolved at the conciliation conference, AFCA will make a Recommendation, which will be binding if accepted by all parties (including the super fund).
- If the Recommendation doesn’t resolve the matter, more submissions and evidence can be exchanged, and finally, a Determination will be made.
Determinations made by AFCA
The Determination is the final step in the AFCA process and is binding on all parties unless the decision is appealed by one of the parties to the Federal Court within 28 days of the Determination.
The grounds for appealing an AFCA Determination to court are limited, and you cannot appeal simply because you don’t like the decision. An appeal can only be made to court on questions of law. This means you can only appeal the matter to court if you think that AFCA got the law wrong when deciding the complaint.
Get help from an insurance lawyer
If you are claiming a death benefit or if you have claimed one and are unhappy with the decision by a super fund, get in touch. We are experts at these claims and offer free initial advice – so, it costs you nothing to find out where you stand.
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