Although most people don’t realise it, your superannuation actually does not form part of your estate upon your death.
Under the trust deed, the Trustee of your super fund has the discretion to decide which of your dependants will receive the benefit of your super savings once you die, regardless of what your will might say. A dependant is any party, but especially a family member, who can show the Trustee that they relied on you for financial support in one way or another.
Whilst the Trustee of your super fund will act in a way it believes is fair and reasonable in distributing your superannuation, such a method can have unintended consequences. For example a recently separated ‘ex’ partner, who might otherwise have received only a nominal amount (or nothing) from your estate, could be gifted with a large sum of money from your superannuation, while other beneficiaries named in your will effectively ‘miss out’.
There are, however, a number of mechanisms which you can put in place to ensure that your superannuation is left according to your wishes.
Death Benefit Nominations
By making a Binding Death Benefit Nomination you can nominate who gets what from your superannuation funds. Alternatively, you can nominate your estate as the beneficiary of your death benefit, thereby ensuring that your super is distributed in accordance with the instructions detailed in your final will.
These nominations may be lapsing or non-lapsing, depending on your particular superannuation fund, and it is therefore important to be aware of whether or not you need to renew or even change your nomination. This is especially true in situations where your personal circumstances have changed.
Death Benefit Agreements
If you have a self-managed super fund (SMSF), you can create a Death Benefit Agreement detailing your wishes with respect to your SMSF benefit in the event of your death. This document, once accepted and executed, actually forms part of the Trust Deed and the rules of the SMSF and is therefore binding on the Trustees of your SMSF.
Death Benefit Agreements are non-lapsing, and will only lapse if it is terminated by notice or replaced with another Death Benefit Agreement.
What does this mean for you?
If you are concerned about the distribution of your superannuation after your death, or if you would like assistance with the preparation of your overall estate plan, please feel free to contact our office to discuss the options available to you on (07) 4963 2000 or via our online contact form.