When it comes to planning for death, superannuation is commonly misunderstood. Your super is not usually dealt with under your Will, but instead under complex rules which can vary between funds and your personal circumstances. In previous blog posts, we explored the problems with the system.
But the situation is not helpless – here are five tips to ensure that your super goes to the people you want:
1 – Make a Binding Death Benefit Nomination
Upon your death, most funds have the discretion to decide who to pay your superannuation to. However, many funds will allow you to make a Binding Nomination requiring them to pay the benefit to certain people. Do not confuse this with a non-binding or ‘preferred beneficiary’ nomination (usually offered as an online form). These nominations are not binding and are often disregarded by the fund if there is a dispute.
2 – Read the forms carefully
The devil is in the detail. When you complete a Binding Death Benefit Nomination, you can only nominate as a beneficiary:
- your dependants (i.e. your spouse, children, financial dependents or a person in an independent relationship with you); or
- your Estate via your legal personal representative (i.e. executor or administrator). Your Will can then provide for how the death benefit is distributed.
Additionally, you need to make sure that the properly completed, signed and witnessed nomination is returned to the fund and the fund acknowledges it has received the nomination.
A failure to nominate a person who is not an eligible beneficiary, or improperly completed forms, or a nomination that has not been acknowledged by the fund, can result in the nomination being invalid.
3 – Review regularly
Your circumstances change with time. It is essential to regularly your arrangements to ensure:
- your nominated beneficiaries are still eligible (if they cease to be, your nomination is likely now invalid);
- your nomination remains effective – many expire automatically after 3 years;
- any insurance you retain through the fund continues to give you the appropriate level of cover.
4 – Get professional advice
Superannuation is a very complex area. Aside from ensuring that it gets paid to the right people, there are also taxation and financial considerations. Obtaining advice from experienced professionals is essential to protecting your nest egg for the next generation.
5 – Self-Managed Super Funds need special attention
The rules governing retail superannuation funds are difficult enough. SMSF are even more complex. Specialist advice is required.
For help with superannuation and estate planning, contact us.