When Good Intentions Go Awry: The Trouble With Leaving Money to Charity in Australia

The case of a father who left $100,000 to charity but had his daughters fight for a share highlights the complexities and pitfalls that surround leaving money to charity from an unspent superannuation fund. This issue reveals how easily good intentions can go awry.

In theory, it should be simple to leave one’s wealth to charity after death. However, as this case demonstrates, the reality is far more complicated. The Australian Financial Complaints Authority (AFCA) ultimately awarded the entire sum to the middle daughter, despite the will indicating that the funds should go to charity. This decision has sparked concerns about how unspent superannuation is distributed after a person’s death.

Research by University of Sydney Law School Associate Professors Natalie Silver and Ben Chen sheds light on this issue. Their analysis of 269 decisions made by AFCA reveals that in only 13 cases, or 11.2%, did the authority distribute the funds according to the will-maker’s wishes. Instead, they gave primacy to the interests of dependants. This is not surprising given the complexities of the current system.

The existing law makes it difficult for a will-maker to ensure who gets their superannuation when they die. The pool of money is managed separately by a super fund trustee and does not automatically form part of a deceased’s estate. Chen notes that this situation is unnecessarily complex. A default rule that super funds should pay unspent superannuation to a deceased’s legal personal representative would resolve many of these problems.

However, even if such a rule were implemented, the issue of charities being disadvantaged in receiving bequests from unspent superannuation remains. Only a small class of dependants can be named as beneficiaries in binding nominations, and charities are excluded altogether. This two-step process results in unnecessary cost and complexity for making charitable superannuation bequests.

The case also raises questions about how clear will-makers’ intentions are when it comes to distributing their unspent superannuation. In this instance, the father’s wishes were far from clear, with a non-binding nomination that ultimately took precedence over his more complex arrangements in his will. This highlights the need for greater clarity and simplicity in the system.

The case of the three daughters serves as a reminder of the complexities and pitfalls that surround leaving money to charity from an unspent superannuation fund. It’s a problem that requires attention and reform, lest good intentions go awry once again.

Silver notes that the obstacles charities face in receiving bequests from unspent superannuation are not unique to them. The issue is broader than just charitable giving, and it speaks to the need for greater simplicity and clarity in the system. By making changes to address these issues, we can unlock billions of dollars in potential charitable bequests.

To achieve this goal, a fundamental shift in how we approach the distribution of unspent superannuation after death is needed. This shift must prioritize simplicity, clarity, and the intentions of the will-maker. Anything less risks leaving good intentions to go awry once again.