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Estate Planning and Superannuation – FAQ

Did you know that superannuation does not form part of your estate when you die? Many people are surprised to learn that it is not automatically covered by a Will. Unless you make a binding nomination as to who you want to receive your superannuation when you pass away, your superannuation and insurance benefits may be distributed at the discretion of the fund’s trustee. To avoid this, it is vital that you understand how your superannuation death benefits will be dealt with upon your passing.

I have a Will in place, will my superannuation be distributed in accordance with it?

As outlined above, no, and this is because superannuation is a non-estate asset. This means the funds do not form part of your estate and are not controlled by your Will. The trustee of your superannuation fund is responsible for distributing your superannuation (death benefits).

Who can I nominate to receive my death benefits?

There are only 5 eligible beneficiaries you may nominate to receive your superannuation death benefits:

• your spouse or de facto partner.
• your children of any age, including stepchildren, adopted children or children from previous relationships.
• a person who is financially dependent on you.
• a person in an interdependency relationship with you – for example a close personal relationship between two people who live together, where one or both provides for the financial, domestic, and personal support of the other.
• the legal personal representative of your estate – the executor of your Will.

If you nominate a person who is not eligible according to the above list, your nomination will be invalid.

Is my beneficiary nomination binding on the trustee of the superannuation fund?

As a general rule, there are two types of nominations that can be made and the difference between the two is significant. It can also have a lasting impact on your family and loved ones.

A non-binding nomination – this is a nomination which the trustee of the superannuation fund will take into consideration when determining who should benefit from your death benefits. However, they are not bound to follow it. For example, you may have nominated that all of your death benefits to be divided equally between your two children, however, you had a de facto partner. With a non-binding nomination in place, the trustee may choose instead to distribute your death benefits to your surviving de facto spouse instead.

The trustee has the final say as to who receives your death benefit (and in what proportions) and they have the right to distribute it to a different person than who has been nominated.

A binding nomination – on the contrary, this is a written direction which is made by you to the trustee of the superannuation fund, and it must be honoured. If we consider the above example, a binding nomination will mean that all of your death benefits will be divided equally between the two children. For a binding nomination to be valid it must:

• be in writing.
• be signed and dated by the member in the presence of two eligible witnesses.
• contain a declaration signed and dated by the witnesses stating that the notice was signed by the member in their presence.
• nominate an eligible person and the share of the benefit they should receive, and the shares allocated add up to 100% of the total superannuation interest.

A binding death benefit nomination is generally valid for a maximum of three years and lapse back to a non-binding nomination if not renewed.

It is a good idea to contact your superannuation fund to find out how to make a binding or non-binding nomination or to ensure you have one in place.

What are the possible implications of death benefits not being considered in estate planning?

If you do not include your superannuation death benefits when planning your estate, your funds can be claimed by anyone eligible to make a claim. This means that someone may receive your funds even if that’s not what you intended or you believe someone else was more deserving of it.

Need Help With Estate Planning?

At Robert Wood and Associates, we are one of the leading law firms Melbourne families rely on for expert advice and professional assistance with a wide range of legal matters, including proper estate planning. Even if you have a plan in place, it should be regularly reviewed ensure it is up to date. Any significant changes in your personal and financial circumstances, should also prompt a review. Whether you need guidance to determine the best method for the distribution of your superannuation death benefits, or if you want to ensure your superannuation is worked into your estate plan and your wishes are adhered to in the event of your death, a family lawyer from Melbourne’s Robert Wood and Associates can help. Contact us to discuss to your needs by calling (03) 9762 3877 or get in touch online now.