For many Australians, superannuation benefits can be one of our most significant assets. While we all consider our super to be our own, you may not be aware that super is technically separate to your estate and will not necessarily be distributed according to the terms of your Will. This is because it is held in trust, not in your own name.
What is My Estate?
What we call “your estate” includes the assets or liabilities owned or held in your sole name. If you have assets like property, bank accounts, cars, shares and/or liabilities like mortgages, loans, credit cards, bills, in your individual name only, then they are considered to be part of your estate.
Assets held as joint tenants, as is often the case with couples holding bank accounts or property held together, do not form part of your estate as those joint assets become the assets of the surviving joint tenant upon your death. Conversely, property owned as “tenants-in-common” does form part of your estate, to the extent of your share of the property.
Assets held on trust for you (i.e. held by someone or something else on your behalf) are a bit more complicated. Some assets held on trust may or may not be considered part of your estate, depending on the circumstances of the trust.
So how is Superannuation considered?
Superannuation is its own beast with its own rules, and every fund is different. While you are a member with an allocated benefit, there are strict rules as to when you are entitled to those benefits and what happens to those benefits upon your death. Those benefits are held on your behalf by the Superannuation Fund Trustee who manages and controls the superannuation fund. The default position is that the Superannuation Fund Trustee will decide who receives your superannuation benefits upon your death, based on legislation, the super fund’s own policies and the discretion of the Trustee.
The Trustee may decide that your superannuation benefits are payable to your estate upon your death, or they may decide that those benefits should go directly to your spouse or your children.
I made a beneficiary nomination online, isn’t that enough?
Not usually. For a lot of superannuation funds, a nomination that you enter online does not bind the Trustee, it is a “preferred nomination.” That is, the Trustee would take your non-binding nomination into consideration, but if the Trustee thinks the benefits should be paid to someone else, they do not have to follow your nomination.
How do I bind the Trustee?
Most commonly, the best way to ensure your wishes for your super benefits are carried out is to complete a Binding Death Benefit Nomination form. These vary depending on the super fund, but usually it is a form that you download from your super fund’s website, print and complete in hard copy and sign before two independent witnesses. Generally, super funds require the original to be provided to them, and some do lapse every three years, meaning that you want to stay on top of it to make sure your binding nomination remains valid and up to date. It’s also very important to read the forms carefully, as super funds can be very strict when it comes to the correct completion of their forms.
Well, I am the Trustee – I have a Self Managed Super Fund (“SMSF”)
If you have an SMSF, a Binding Nomination can still be extremely important. While you or a company you control may be the Trustee of your SMSF and have the power to appoint a new Trustee to take over upon your death, the best way to make sure that Trustee follows your wishes is to execute a Binding Death Benefit Nomination. The advisor who created the SMSF will be able to assist you in executing the form in accordance with your fund’s rules.
When it comes to preparing Binding Nominations, we recommend that you seek financial advice from your accountant and financial advisor, as superannuation fund policies can vary, and your choices can have significant tax and financial implications.
At Eckermann Lawyers, we can work with your accountant and financial advisor to create a tailored estate plan based on your unique circumstances and ensure your intentions for your superannuation are reflected in your Will and Power of Attorney. Call us on 8366 7900 to speak to one of our specialist Wills & Estates lawyers.