Do you know what document decides the beneficiary of your super when you die?
With so much focus on superannuation over the past few years, I find it amazing that so many people still do not understand what measures are in place to ensure that their superannuation is going to be passed on to the people they intend. Most people say “it’s taken care of in my Will”. What many don’t understand is that your superannuation is not included in your Will.The group of people who share this misunderstanding includes a scary number of financial planners, accountants and non-specialist lawyers.
The truth is that your superannuation savings are paid to your dependants by the trustee of your superannuation fund.
There are 3 common ways that determine who the trustee will pay your death benefit superannuation savings to:
1. A Binding Nomination – this is a nomination provided by you to the trustee of your superannuation fund, which details who the beneficiaries of your superannuation will be and in what form it will be paid (lump sum/income stream). This is binding on the trustee and must be adhered to.
2. A Non-Binding Nomination – this nomination is also provided by you to the trustee however is not binding on the trustee. This means that the trustee will consider the people that you have nominated, but will retain ultimate discretion given the circumstances at the time of your death.
3. No nomination – this is where no nomination has been put forward to trustee and therefore the trustee is unaware of who you would like to be the beneficiary of your superannuation. In this case, the trustee will use their discretion given your circumstances at the time of your death.
Where trustee discretion is involved, it is important to understand that the trustee is required to pay your superannuation in what they consider to be fair and reasonable having regard to your dependants and relationships.
In an industry, corporate and retail superannuation fund a professional trustee is responsible for the payment of a death benefit. Please note that not all superannuation funds give you the ability to provide them with a binding nomination.
In a Self Managed Superannuation Fund (SMSF), it is generally your Legal Personal Representative (LPR) who will become a temporary trustee of the SMSF in the process of making a death benefit payment. It is a good idea to let that person know of their responsibility in advance and where they can find any relevant nominations/documentation in the event of your death.
A lot of wealth is held within the superannuation environment and, despite all of us being invincible, it is prudent to take the time to plan for the distribution of your superannuation in case you get extremely unlucky and die one day.
