Planning your estate

Ensuring your super goes to those you choose

Superannuation can form a large part of a person’s assets, however, people often do not realise that superannuation does not automatically form part of their estate on their death and they have not taken steps to ensure that their superannuation will pass according to their wishes.

Did you know superannuation does not automatically form part of your estate?

If a valid binding death benefit nomination is not made then the Trustee of the superannuation fund will exercise its discretion as to who receives the deceased’s superannuation, including any life insurance component, and this may not be want the deceased wanted.

Generally, binding death benefit nominations must be made every three years to be valid.  It must be signed by the member, 2 witnesses and the death benefit must be paid to a dependant as defined in the Superannuation Industry (Supervision) Regulations 1994 (Cth) (“SIS Act”) or to the legal personal representative of the deceased’s estate.

If a death benefit is paid to the legal personal representative, it then forms part of the deceased’s estate and is distributed according to the deceased’s Will.

If a nomination is made which is non-binding the Trustee may consider it, however, it not bound to act in accordance with the nomination.

A SIS Act dependent is defined as being the deceased member’s:

1. spouse (including de facto and same sex partner);
2. child;
3. person with whom they were in an interdependency relationship as at the date of death; or
4. a financial dependant as at the date of the deceased member’s death.

Tax also needs to be considered as a person may be a SIS Act dependant but not a tax dependant.  If a death benefit is paid to a child who is over the age of 18 and not financially dependent on the deceased, the benefit will be subject to tax.  If the death benefit is paid to any of the following, the dependant is entitled to a tax free benefit:

1. The deceased’s spouse;
2. The deceased’s former spouse;
3. The deceased’s child, provided that at the time of death the child is under the age of 18;
4. A person with whom the deceased had an “interdependency relationship” just before the deceased died; and
5. Any other person who was a dependant of the deceased just before the death of the deceased.

In relation to self managed superannuation funds, the Trust Deed sets out the requirements in relation to binding death benefit nominations. If the Deed does not make provision for death benefit nominations then a nomination cannot be made.

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