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Have you updated your superannuation binding death benefit nomination?
You may not be aware that your superannuation death benefits do not form part of your estate when you die.
A super fund is a form of trust, so your superannuation forms part of the trust.
When you sign up to be a member of the super fund, it is not uncommon for the trustee of the super fund to get you to sign a “death benefit nomination”. A “death benefit nomination” allows you to appoint someone to receive your superannuation on your death (called your death benefit). A “death benefit nomination” can be binding or non-binding.
What you may not realise is that a “death benefit nomination” can lapse after 3 years or not be binding on the trustee. What this means is that the trustee of the super fund will decide who receives your death benefit on your death.
We once acted for the executors of an estate where the deceased was a member of 6 different super funds. We submitted the financial circumstances of all the people who could potentially receive the deceased’s death benefit and the 6 super funds came up with 3 different beneficiaries. So don’t assume that the trustee of your super fund will necessarily do what you consider to be the “obvious choice”.
In some cases, super funds will pay a death benefit to a spouse from whom the deceased was separated, but not yet divorced, from.
You should also note that there are only certain people who can receive your death benefit. This includes:
- your spouse (current and former);
- children; and
- any persons whom you had an “interdependency relationship with” (i.e. provided each other with financial, domestic and personal support).
Within this group, there are certain people who are more tax effectively treated than others. For example, your spouse and children under 18 years.
If you would like to leave your death benefit to someone outside this group, then you can direct that your death benefit be paid to your “legal personal representative”. This is a fancy term to describe the executor of your estate. If all or part of your death benefit is paid to your estate, then you can leave it to:
- Whomever you wish, including your spouse and kids; and/or
- Through a more tax effective and asset protective vehicle, like a testamentary trust.
For more information on updating your death benefit nomination, please contact Camille Broadhurst at Russell Kennedy Aitken Lawyers.
Camille Broadhurst, Associate Solicitor at Russell Kennedy Aitken Lawyers
Email: [email protected]
Phone: 8987 0000
Please note the information contained in this article is intended as general guidance and should not be regarded as legal advice. Should you require specific advice, please contact Camille Broadhurst directly.