Neal v Brown
Don't leave your super withdrawals too late

Super death benefits paid to non-“death benefit dependants” (eg independent adult children) are taxed between 15 - 32% on the taxable component of those benefits. A way to avoid this path is for the super member to withdraw their super before they die - which can be difficult to predict how much to leave in super vs how long one is expected to live. Most would seek to keep more than they need such that if they were to run out of super before their death, that would be unplanned.

The case of Neal v Brown [2024] NSWSC 841 is an example of a super member seeking to withdraw their super before their death (so those withdrawn assets become assets of the super member and part of their estate when they die).

His will was signed seven days before his death and, on the day he signed his will, he sent instructions to both of his superannuation funds (OnePath and PortfolioOne) to withdraw all of his superannuation benefits into his personal accounts.

One of those requests was processed in six days and paid the day before his death (to OnePath Super) and the other request (to PortfolioOne) took an extra seven days. So his PortfolioOne super, despite the withdrawal request being dated before his death, still had not been withdrawn before his death by the super trustee and therefore, without more, remained as part of his superannuation on the date of his death. The other portion of his super with OnePath had been withdrawn before his death and was therefore no longer part of his super and went to his estate.

Clause 8 of his will was declared in the Judgment to constitute a separate gift of the proceeds of his superannuation benfits:

8. I CONFIRM all net monies from my superannuation and pension entitlements in PortfolioOne Pension Service (PIN XXXXXXXXX) and OnePath OneAnswer Frontier Pension (PIN XXXXXXX) and all other pension, retirement or superannuation funds (if any) in my name or held in my favour at the time of my death be received by my Trustee into my Estate and then to be left and distributed in equal shares to those surviving me being [the Children] and for [Sebastien] (to be held in trust until he attains twenty five (25) years of age) for their respective benefit absolutely.

The drafting of clause 8 was described by the Judge as “clumsy”. Given the deceased desired to withdraw his benefits before death at the time of preparing his will, this should have been completed in the drafting of the will. For example, clause 8 could have governed not only death benefits paid to the estate but assets of the deceased that were withdrawn from the deceased’s super funds before death.

Unlike van Camp, this case did not involve any claim of loss of capacity by the deceased, only that his instructions days before his death were not processed by one of his super trustees in time to exit his super as he had planned. SMSF can offer an alternative in the case of incapacity - see that the SMSF trust deed has a clause allowing for members to exercise their powers by power of attorney (including to withdraw their super if they have satisfied a condition of release). But in this case it would not have assisted the deceased for PortfolioOne to process his super withdrawal faster - this may not be easier for a SMSF, for example if it is real estate that the member is seeking to withdraw.