Superannuation: A Forgotten Asset
A common oversight people make when thinking about the distribution of their assets after their passing is dealing with their superannuation.
There is a misconception that by writing a will which mentions your super you have adequately dealt with its distribution, however as super money is held for you in a trust and governed by superannuation laws, it does not form part of your estate as your estate is only made up of items which you own.
Who Can Receive My Super?
After your passing, your super fund must pay what is known as a ‘death benefit’ to one or more eligible beneficiaries. It is therefore important that you tell your super fund who you want your death benefit to be paid to by making a valid death benefit nomination. The eligible beneficiaries of your super cannot be just anyone; they must be either dependents or your ‘legal representative’ – this is the executor of your will.
Your dependents may include:
Your current spouse or de facto partner;
Your children (regardless of their age);
Anyone who is financially dependent on you, or with whom you share major financial commitments
A reason for nominating your legal representative is that you can specify in your will how you wish for them to distribute the funds following their receipt of them. This allows you greater control over exactly who receives your super as your legal representative will be able to distribute the money to people that are not your dependents.
How Do I Nominate My Beneficiaries?
In order to nominate your beneficiaries, you must communicate with your super fund. Most funds will give you several options as to the manner in which you nominate your beneficiaries. It is important to note that the following categories are not exhaustive, and there may be additional options available to you, especially if your super is already in the pension phase.
If you make a valid binding death benefit nomination with your fund, the trustee must pay your super to the beneficiaries as nominated by you. A binding nomination can be lapsing or non-lapsing. Lapsing nominations generally require that you renew your nomination every three years, or they will expire, whilst non-lapsing nominations may not expire.
If you make a non-binding nomination, although your wishes will be taken into account, the trustee of the super fund will have the final say as to which of your beneficiaries will receive your super and in what proportions.
If you make no nomination the trustee of your super fund may pay your death benefit to your estate or may decide which of your eligible beneficiaries the super should be passed to.
If you make an invalid nomination your super will be dealt with as if you had made no nomination.
What to do now?
In order to ensure that your super is distributed in accordance with your wishes you should:
Check whether your fund offers beneficiary arrangements which suit your wishes;
Check that the persons you wish to nominate are eligible under superannuation law;
If you wish for your super to be distributed by your legal representative, ensure you have a valid will;
Communicate with your fund about who you wish to nominate as your super beneficiaries and complete the relevant forms to ensure your nominations are in place;
If you have decided to make lapsing nominations, ensure that you make note of when you must renew them; and
Discuss the possibility of paying your death benefit in one lump sum or as an income stream and the tax implications of doing so with your super fund and/or your legal representative.
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