The recent Federal Court case of Lynn v Australian Financial Complaints Authority [2025] FCA 175 (Lynn) serves as an important reminder of the need for careful succession planning, especially in blended family situations, particularly where a member, in the midst of a relationship breakdown, has made a ‘non-binding’ death benefit nomination.
This article outlines the key lessons and practical guidance arising from the case of Lynn.
Background Facts
- Richard Lynn (Member) and his estranged wife (Ms Lynn) were married in September 2007.
- In February 2018, the Member completed a ‘non-binding’ nomination (as opposed to ‘binding’) directing that his superannuation benefits be shared equally between his six children (namely, his four daughters from his previous marriage and two stepsons from Ms Lynn’s previous marriage) excluding Ms Lynn, all of whom were considered to be the Member’s ‘dependants’ under section 10 of the Superannuation Industry (Supervision) Act 1993 (SIS Act).
- On 8 March 2019, the Member executed his will leaving his estate to Ms Lynn, which he later sought to revoke when he obtained a violence restraining order against Ms Lynn, to leave his entire estate to his four daughters equally.
- The Member passed away in 2021 and was a member of Australian Super leaving the total superannuation death benefit balance of approximately $171,000 (excluding interest).
- At the time of the Member’s death, the Member was legally married to Ms Lynn, though they had been living apart for about 6 years. Also, the Member and Ms Lynn had been separated under consent orders dealing with their financial and property matters, which were later discharged in April 2021, with divorce proceedings still underway at the time.
- Ms Lynn claimed she was unemployed, on a disability pension, and had been financially supported by him.
Australian Super’s initial decision
- The trustee of Australian Super (Trustee) initially decided to pay the death benefit to the Member’s legal personal representative (LPR) (i.e. to the Estate).
- However, this decision was later revoked and the Trustee subsequently resolved to pay 100% of the death benefit directly to Ms Lynn. Such decision was based on the evidence presented by Ms Lynm and the Trustee was satisfied that Ms Lynn was the Member’s lawful spouse at the time of his death.
- This led to an objection from his daughters and, eventually, a complaint was submitted to the Australian Financial Complaints Authority (AFCA) by the Member’s daughters.
AFCA’s Determination
The AFCA found that the Trustee’s decision to give the Member’s entire super death benefit to Ms Lynn was not fair or reasonable and determined that:
- 50% of the superannuation death benefit should be paid to Ms Lynn, largely in recognition of the financial arrangements and outstanding obligations from their separation, including mortgage liabilities; and
- The remaining 50% should be divided equally between his six children, as per the terms of his non-binding death benefit nomination.
Two Factors considered by the AFCA
In reaching the determination above, AFCA highlighted that, when deciding what is ‘fair and reasonable’ between dependants with competing claims to a super death benefit, AFCA generally considers the following two factors in assessing how the trustee exercises its discretion:
- Whether the proposed distribution aligns with the primary purpose of superannuation death benefits—that is, to provide financial support to those who were dependent on the deceased member at or around the time of death and who might have reasonably expected ongoing financial assistance into retirement but for the member’s death; and
- The expressed wishes of the deceased member.
Based on the factors outlined above, AFCA’s decision in Lynn was governed by the following key facts:
- In light of the evidence in support of the Member’s planning on divorcing Ms Lynn, it was not fair and reasonable to pay the entire benefit to Ms Lynn when she could not have had a reasonable expectation of continued financial support due to the ongoing divorce proceedings with the Member, at the time of the Member’s death.
- Ms Lynn receiving 50% of the benefit was fair and reasonable as this represented the approximate quantum of expenses that Ms Lynn would have had during the period of 18 months following the date of the Member’s death. The 18-month period was seen as a reasonable amount of time in which the Member and Ms Lynn would likely have finalised the divorce proceedings if the Member had not passed away;
- It was fair and reasonable for the remainder of the benefit to be paid in line with the Member’s wishes as expressed in his non-binding death benefit nomination, resulting in payment of the remaining 50% of the benefit to his children and stepchildren in equal shares; and
- Whilst the Member’s Will serves as a guide because a superannuation death benefit must be distributed consistently with the purpose of superannuation, such Will was taken into account as an indication of the member’s wishes.
What do we learn from this case?
The Lynn case highlights the importance of proactive succession planning in relation to superannuation death benefits, particularly through the use of ‘binding’ death benefit nominations, which need to be reviewed and updated regularly, along with other appropriate estate planning measure.
In the case of Lynn, despite the fact that the Member and Ms Lynn had been estranged for years and had consent orders in place to deal with financial and property matters, this did not prevent Ms Lynn from challenging the Trustee’s decision. Because their financial relationship had not been fully severed, Ms Lynn was able to argue that she remained financially dependent on the Member due to them having joint loan/mortgage obligations at the time, following their property settlement.
In hindsight, had the Member signed a valid binding (rather than non-binding) death benefit nomination during his divorce proceedings, the Trustee would have been required to follow his instructions. This likely would have avoided the legal dispute and ensured that his children received the benefit as he intended.
It is also noteworthy that some superannuation funds do not offer non-lapsing binding death benefit nominations. In such cases, the nomination remains valid for only three years from the date it was signed or last amended. Accordingly, you will need to ensure that it is renewed before it lapses and is then considered as a non-binding death benefit nomination.
According to ‘AFCA’s Approach to Superannuation Death Benefit Complaints’, the purpose of a death benefit is “primarily to provide for those people who were financially reliant on the deceased’s member at or around the date of death and who might have expected continuing financial support from the member into retirement, but for the member’s death”.
In line with AFCA’s approach above, the definition of “dependant” under the SIS Act (which determines who may receive a deceased member’s superannuation death benefit) is, ‘inclusive’, rather than ‘exclusive’. As a result, we have observed that several recent trust deeds for retail superannuation funds have adopted similarly broad definitions of ‘dependant’.
While this seems in line with AFCA’s approach above, it can also increase the risk that a member’s non-binding death benefit nomination may be subject to disputes or claims after death.
As such, it is critical to take proactive steps to protect your interests by updating your Estate Planning documents, including your superannuation nominations, whenever there are changes in your personal or financial circumstances.
Need Legal Help?
If you wish to know more about how ensure that your superannuation death benefits are distributed in accordance with your wishes whilst minimising the risk of disputes and family conflict, please contact our team today on 03 9598 9489 to discuss how we can help you.
