The Facts

Bankrupt receives money from his late mother's superannuation fund

A man was declared bankrupt and a trustee in bankruptcy was appointed to his estate in 2011.

In December 2013, the bankrupt's mother died and, after a grant of probate was made in February 2014, the proceeds of her estate were distributed. Her estate included, amongst other assets, the proceeds of a regulated superannuation fund.

Under the Bankruptcy Act 1966 (Cth), payments made from a regulated superannuation fund to a bankrupt after the date of bankruptcy, unlike other payments, do not have to be divided amongst the bankrupt's creditors.

Part of the mother's estate, an amount of $87,900.33, was distributed to the bankrupt in accordance with her will. The money was paid to the bankrupt's wife because the bankrupt did not operate a bank account in his own name.

The trustee brought proceedings against the bankrupt's wife seeking a declaration that the money was not excluded under the Act and should be divided amongst the bankrupt's creditors.

case a - The case for the bankrupt's wife

cae b - The case for the trustee in bankruptcy

  • The grant of probate of my mother-in-law's estate separately identifies funds in the amount of $248,696.49 held by her in a regulated superannuation fund.
  • The funds were received by solicitors for the estate, not intermingled with any other funds, and were distributed separately to the beneficiaries of my mother-in-law's will in March 2014.
  • The fact that the payment was made through the solicitor and the estate does not alter the nature of the payment as being made directly and solely from a regulated superannuation fund.
  • I received the money at a time when I was unaware that my husband's bankruptcy had been extended and the money has since been spent. It would be unfair to make me repay the money.
  • The bankrupt did not have an interest in the relevant superannuation policy, his mother did.
  • The payment to the bankrupt's wife was not from a regulated superannuation fund, it was a distribution from the estate of the bankrupt's mother under the terms of her will. If it had been made direct from the fund there would be evidence to support this, but none has been provided. Indeed, it's clear the money passed through several hands.
  • The bankrupt was a residuary beneficiary under his mother's will – that is, he was only entitled to all or part of the remainder of an estate after all the specific gifts had been given. That means he had no proprietary interest in any of the specific assets of his mother's estate, he merely had a right to ensure that the executors or administrators of his mother's estate completed their duties.
  • The funds should be repaid and divided amongst the bankrupt's creditors in the usual way.

So, which case won?
Cast your judgment below to find out

Vote case A – the case for the bankrupt's wife
Vote case B – the case for the trustee in bankruptcy

Mark Joseph
Stacks Law Firm

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.