TPD pensions – part of the property pool or not?
Total and Permanent Disability (TPD) pensions are part and parcel of most superannuation packages.
But in the event of separation and divorce, are those TPD pensions included in the property pool?
A TPD pension provides a safety net for people who can no longer work due to a disability or injury which occurs during their working life before retirement age. It is usually paid as an income stream, not as a lump sum pay out.
It is common for many in paid employment to have TPD pensions attached to their superannuation benefits.
TPD stands for Total and Permanent Disability and provides a safety net in circumstances where a person cannot work due to a disability which befalls them during their working life and before retirement age. It is usually paid as an income stream and is generally not received as a lump sum amount.
In a recent case, (Tomaras & Tomaras), the husband had a TPD insurance policy, which he accessed after injuring his wrist at work. As a healthcare professional, he was no longer able to continue working.
During divorce proceedings, the wife said her former husband’s entitlements under the TPD insurance policy were property, and that she should be paid an amount equal to 80 per cent of the payments received by the husband each month.
The judge rejected the wife’s contention that the TPD entitlement was “property” on the following basis:
- The husband had a right to receive the disability income insurance and be assessed for income tax purposes
- The husband’s right to receive the TPD payments arose only where he met certain obligations. Therefore, if he did not meet these obligations the payments ceased
- According to the terms of the policy, the entitlement was capable of being reduced or terminated at the insurer’s discretion.
In another case, (Welch & Abney) a wife who received a TPD pension appealed a decision in which the trial judge treated her TPD pension as a lump sum, to the value of around $970,000.
In that case the judge treated the $970,000 as if it were property in the pool of assets rather than a financial resource available to the wife.
During the appeal, the higher court looked at the reality of what the lower court had ordered – in real terms the wife was to receive a property to the value of $248,000 with an ongoing mortgage commitment and a cash amount of less than $10,000, compared to the husband who received an unencumbered home to the value of $380,000, and cash deposits in excess of $700,000.
The higher court found the effect of treating the wife’s TPD pension as property with a fixed value, without considering the real impact of such treatment, was not just and equitable in the circumstances.
Dividing property at the end of a relationship or marriage can be complicated. If you have questions about who gets what in the property pool, contact Michael Lynch Family Lawyers on (07) 3221 4300 or email our office for an appointment at: [email protected]
