Many people wrongly presume that upon their death their superannuation will be dealt with in accordance with their Will. Unless you have nominated your ‘estate’ as the beneficiary in your superannuation, then it may not be dealt with in accordance with your Will. Superannuation, like life insurance, is usually dealt with separately from your Will. If you have not nominated anyone as a beneficiary, you face the risk that your superannuation may not end up being paid to whom you wanted, and will be paid out as the trustees of your superannuation fund determine based upon the rules of your particular fund.
To ensure that the trustee of your superannuation fund pays your superannuation to the person/people that you want, you must have completed a Binding Death Benefit Nomination (BDN). Your BDN allows you to make a direction to the superannuation fund trustee as to whom you want benefits paid, and in what proportion. If you do not have an up to date BDN then the trustee of the superannuation fund can decide who they will pay benefits to, and the proportions.
Your BDN must be renewed every three years – even if you are nominating the same person/s. Your superannuation fund should send you a reminder of the need to update your BDN, but many do not. It is important to diarise the date to ensure that your BDN is up to date. Like your Will, your BDN must be completed in a particular way, signed and witnessed. If you have a self managed superannuation fund, the rules may be different, and they can be changed.
With second/subsequent marriages and de facto relationships, provided there is no Family Court Order to the contrary, your superannuation is often a method of ensuring that your children from a previous relationship receive some of your assets on your death. For example, you may have a share in your house with your new partner and money in your superannuation. You could leave your share in your home to your new partner and complete a BDN leaving your superannuation to your children. How you structure distribution of your superannuation death benefit can give rise to tax liabilities, and you need to take advice and carefully consider these issues when drafting a BDN.
When reviewing your estate planning needs, it is important to take into consideration all matters. Contact our Estate Planning Team for further information.