Next to your family home, superannuation is often one of the largest assets you might own at the time of your passing. It is crucial to understand and consider how superannuation should be addressed as part of your estate planning.
Despite superannuation being a substantial asset, it is not strictly an asset of the estate and is therefore not automatically distributed according to the terms of your Will. Instead, different procedures and timeframes apply to the distribution of superannuation upon a person’s passing. Generally, superannuation is held in a trust subject to specific rules and regulations. Additionally, each superannuation fund may have slightly different processes and procedures.
Many people assume that the beneficiary they nominate when they join their super fund will be the person who takes all their superannuation entitlement upon passing. This is not always the case. You must ensure that you complete a “binding death benefit nomination” with your superannuation fund. This death benefit nomination is a binding direction to pay your member benefit in the super fund to a specified beneficiary upon your passing. If you have a valid binding death benefit nomination at the time of your passing, the trustee of your superannuation fund must pay the death benefit in accordance with that nomination.
Where there is no valid and binding death benefit nomination, the payment of the death benefit will be subject to the discretion of the trustee of the superannuation fund, having regard to the eligible beneficiaries and dependents. This means your superannuation might not be distributed to who you intended.
The specific requirements of a binding nomination will vary from fund to fund, but generally, it must be in the form specified by the fund and witnessed by two independent adults who are not named beneficiaries. Some funds will offer a lapsing nomination, which will automatically lapse every 2-3 years, and you must ensure it is updated. Other funds will also offer a non-lapsing nomination. Again, it is important to discuss the specific requirements with your particular fund.
When completing your binding death benefit nomination, you will need to consider who you can nominate as a beneficiary. This can include a dependent (such as your spouse, child, any person financially dependent on you, or any person who was in an interdependency relationship with you at the date of your death) and/or your legal personal representative (executor). You can nominate as many beneficiaries as you like (ensuring the total allocation is 100%), or you can direct that your entire death benefit is to form part of your estate (in which case it will then be distributed in accordance with your Will).
There are tax implications that arise from your binding death benefit nomination, so it is important to obtain financial advice.
Due to the complexities that arise with superannuation, it is crucial that you consider your superannuation as part of your estate planning. Obtain legal and financial advice and discuss your options with your specific fund to ensure your wishes are accurately reflected and your loved ones are provided for.
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