On 1 February 2002 the Matrimonial Property Act 1976 became the Property (Relationships) Act 1976. This Act now applies equal property sharing principles to certain de facto relationships as well as to marriages. To be included under the new Act a de facto relationship must normally have existed for at least three years and the couple must be living together.
The new Act extends the property sharing principles to "relationship property" to apply on death, as well as on the breakdown of the relationship. There is now potential for there to be more than one claimant to relationship property upon death.
A superannuation scheme benefit that derives from contributions made during the period of the relationship, or from employment during the period of the relationship, is relationship property.
This poses a practical problem for scheme trustees looking to pay a death benefit, as their former discretionary powers have been diminished.
The surviving marital partner and/ or surviving de facto partner(s) has (have) six months to elect to divide the relationship property between themselves and the estate. If an election is not made the default options of trustees’ discretion or reversion to the provisions of the will, will apply.
Trustees will be concerned at the possibility of an unknown partner of a deceased member making a claim within six months of death that might upset their planned distribution. Due enquiry by trustees is now essential.
Trustees should ask scheme members to review their “Nomination of Beneficiary” each year. The simplest way of doing this is to distribute forms to members at the same time as the annual report is distributed.
Death claim procedures need to be reviewed to establish how claimants may be identified.
If careful enquiry discloses no more than one claimant to relationship property, then prompt distribution should proceed according to the trustees’ established policy. The trustees’ responsibility to beneficiaries requires that no delay should be contemplated.
If however, careful enquiry discloses that there may be more than one relationship that has been sufficiently well established to claim relationship property, a simple distribution process may be inappropriate. The trustees will need to consider the various parties’ interests before paying the benefit, and may prudently decide to withhold a portion of the benefit until the six month election period expires.
Source: This report was prepared by AON Consulting.
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