Superannuation. You may have been contributing to it for many years, most likely your employer has been for many more.
Benefits held in retail superannuation funds or in self managed superannuation funds (“SMSFs”) on behalf of an individual are quickly becoming more valuable than any other asset of most working individuals.
When it comes time to carry out estate planning and consider how you would like your assets to pass in the event of your death, however, there are some key considerations that you need to bear in mind in relation to superannuation benefits.
During your lifetime, money held in a superannuation account is held on trust, controlled by a trustee and released for your benefit at certain times, most often upon retirement. When you pass away, the money held in a superannuation account on your behalf and any life insurance proceeds held by the same trustee become known as “superannuation death benefits”. In all cases, the trustee is governed by the Trust Deed and relevant legislation and case law in managing the benefits held in trust.
Superannuation death benefits are different to funds you hold in a bank account:
- The first significant difference is that these benefits will not (in the first instance) form part of your estate to be distributed in accordance with your Will.
- Secondly, there are a limited number of persons who are entitled to directly receive your superannuation death benefits. The trustee controlling the superannuation fund is bound by law to release the benefits only to an eligible beneficiary or beneficiaries.
Generally speaking, trustees are legally given discretion to determine the appropriate recipient(s) of your superannuation death benefits and to release the benefits accordingly.
Can I decide who receives my superannuation death benefits?
The best way to be sure of how your superannuation death benefits are paid is to make a Binding Death Benefit Nomination or “BDBN” while you are alive.
Section 59(1A) of the Superannuation Industry (Supervision) Act 1993 (Cth) (the “SIS Act”) enables the Trust Deed of a superannuation fund to permit a member to make a Binding Death Benefit Nomination. Whether you are able to make a Binding Death Benefit Nomination will depend on the terms of the Trust Deed itself.
Provided the conditions or rules of the Trust Deed are complied with, a Binding Death Benefit nomination (in the approved form) allows a member in their lifetime to provide a written direction binding the trustee to pay their superannuation death benefits to either:
- a specific nominated dependant or dependants of the member, or
- the member’s Legal Personal Representative, to form part of their estate.
The Superannuation Industry (Supervision) Act 1993 (Cth) defines “dependant” to include a member’s spouse, child and any person with whom the member has an interdependent relationship.
We recommend that you speak to one of our Estate Planning Lawyers if you would like assistance in preparing a BDBN, as a mistake in drafting can be fatal to the validity and enforceability of the BDBN.
Please contact our Business Development Team on (07) 3252 0011 to book an appointment with our Estate Planning Lawyers today.
This article was written by Kathleen Watt (Associate).