Most of us have superannuation and with most superannuation funds offering life insurance, the value of your superannuation death benefit on your death may be considerable.
So, what happens to your superannuation when you die?
You may be surprised to know that your superannuation death benefit (which includes the proceeds of any life insurance held in your superannuation fund), is not automatically part of your estate distributed in accordance with your Will (or under the intestacy laws if you do not have a Will).
There are rules that govern who can receive superannuation death benefits and those rules allow your superannuation death benefits to be paid to your estate (and then distributed in accordance with your Will), or to a dependant (as defined under the superannuation laws). If under the tax laws a person qualifies as a dependant, that person receives your superannuation death benefit tax free.
How do you ensure your superannuation death benefit is paid in accordance with your intentions?
If you do nothing, then your superannuation death benefits will be paid to your dependants or your estate in the proportions determined by the trustee of your superannuation fund – not an ideal outcome.
You can, by way of a death benefit nomination, nominate your estate or your dependants (or a combination of both), who are to receive your death benefits on your death.
There are two types of nominations – non-binding and binding.
A non-binding death benefit nomination is not binding on the trustee of your superannuation fund. The trustee of your superannuation fund may or may not pay your superannuation death benefit to those you have nominated.
A binding death benefit nomination (BDBN) removes the discretion from the trustee of your superannuation fund to pay your superannuation death benefit to anyone other than those dependants or your estate you have nominated. Care must be taken when completing a BDBN as there are strict rules that apply in relation to a BDBN.
If the BDBN is not valid at the time of your death, the trustee of your superannuation fund is not bound to pay your superannuation death benefit to those you have nominated.
Examples of invalid BDBN:
- your BDBN is older than three years;
- your BDBN has not been witnessed by two people; or
- you nominate persons who are not dependants or use the incorrect words when you want your death benefit paid to your estate.
The Australian Securities and Investments Commission (ASIC) has put the financial sector on notice ‘about meeting requirements for witnessing signatures, after finding issues with advisers failing to correctly witness binding death nomination forms for superannuation benefits.’ (see ASIC Media Release January 2018).
How can we help?
We are across the laws relating to superannuation and in collaboration with your accountant and financial planner, we can provide you with advice in respect to:
- superannuation death benefit nominations;
- asset protection and superannuation;
- your Will and estate planning and the interrelationship with superannuation; and
- Self Managed Superannuation Funds.
Now is the time to Plan. Don’t leave it until it is too late! – contact JPM Legal to make an appointment with Eileen Meehan to discuss your unique circumstances.