Where is your superannuation headed?
Your super is likely to be one of your most valuable assets but many people do not realise that it does not automatically become part of your estate on your death and therefore may not be covered by your Will.
The provisions of the Superannuation Industry (Supervision) Act and the inherent discretion granted to superannuation trustees can result in super benefits being distributed outside your Will and in a way perhaps very different to how you expect.
If you are concerned about how your superannuation benefits will be distributed following your death, a properly executed death benefit nomination can ensure that your superannuation is paid to the person whom you wish to receive these assets upon your death
What is a death benefit nomination?
A death benefit nomination is a notice you give to the trustee of your superannuation fund requesting the payment of your death benefits in a specified manner upon your death.
There are generally two types of nominations:
- A binding nomination. This is binding on the trustee, that is, the trustee MUST comply with it.
- A non-binding nomination. This is merely an expression of your wishes, and does not require your benefits to be paid in a specific manner. The superannuation trustee may be able to act with some discretion as to how payment is made
If you have a retail super fund you may have completed a form indicating your preference for the distribution of your super proceeds in the event of your death. This was most likely NOT a binding nomination.
In the absence of a binding nomination, it is the trustee of your superannuation fund that decides to whom your superannuation benefits will be paid upon your death.
Like your Will, your binding death benefit nomination should be kept up-to-date so that it reflects your current estate planning strategy and takes into account any changes to your circumstances and those of your intended beneficiaries.
This is especially important if you have a retail super fund where the binding nomination may only be valid for 3 years.
It is common for succession planning within any business to involve insurances such as key person insurance, buy-sell agreements and the like. In order to make sure there aren't any unintended tax consequences it is vital that binding and effective death nominations exist.
Talk to a member of our Tax, Structures & Planning team if you have concerns about where your super is headed or if you want to ensure your estate planning and business succession planning is properly arranged.