A father’s will left $100,000 to charity. His daughters fought for a share

A father of three died with almost $100,000 in unspent superannuation. His three daughters, two of whom had been cut out of his will, wanted it split equally between them.

His middle daughter was ultimately paid the entire sum – even though his will suggested the cash should go to charity.

The case highlights difficulties faced by will-makers in ensuring their unspent superannuation goes to their intended beneficiary, and the particular obstacles to leaving the money to charity.

The decision to give the money to the middle daughter was made by the Australian Financial Complaints Authority (AFCA), which handles complaints for most superannuation funds.

New research by University of Sydney Law School Associate Professors Natalie Silver and Ben Chen reveals AFCA often departs from the wishes expressed by a will-maker when resolving complaints about the distribution of a deceased’s super.

The authors analysed 269 AFCA decisions and found it distributed the super according to the will in 13 or 11.2 per cent of the 116 cases that discussed the will. The authority gives primacy to the interests of dependants, the authors say.

Silver and Chen argue the law on distributing a deceased’s superannuation is unduly complex, and argue for changes that would make it easier for the money to be left to charity.

“Together with the family home, superannuation is now the principal source of wealth for most working Australians,” they write in a forthcoming Melbourne University Law Review paper.

Most Australians now die with the majority of wealth they had when they retired, including most of their super balance, according to a Treasury report cited by the authors.

Australia’s compulsory superannuation system provides “a rich source of potential charitable bequests” that could unlock billions, they say, helping the government reach its aim of doubling philanthropic giving by 2030.

Under the existing law, it is difficult for a will-maker to ensure who gets their superannuation when they die. This is because the pool of money is managed separately by a super fund trustee and does not automatically form part of a deceased’s estate.

Chen said the current situation was “unnecessarily complex”. Many of the problems would be resolved, he said, if there was a default rule that super funds should pay unspent superannuation to a deceased’s “legal personal representative”, which is typically their executor.

The executor would then distribute the funds according to the will, including to any nominated charities.

But super fund trustees are responsible for distributing the funds. They are not bound by the will and can only distribute the funds to a narrow group of people. AFCA handles complaints about how the funds are distributed, and in limited cases the Federal Court may hear an appeal.