For everyone Money matters: Make a will but don’t forget your super
The need to establish a will to ensure your personal wishes are met after you die are well documented. Having established a will, it should be updated to meet changes in personal circumstances such as entering/leaving a relationship.
Dying without a will leaves your estate subject to the provisions of state legislation that spells out who gets what. This is clearly not a desirable situation.
But what about your superannuation? Superannuation is not an investment but a financial structure that operates under a trust deed overseen by a trustee or trustees. The trust deed provides opportunities for the trustees to invest in a broad range of financial assets for the benefits of the members of the superannuation fund. It is the trustees who decide what happens to your super when you die. It is not automatic that your super forms part of your estate.
Consequently, it is imperative that you advise the trustees of your super fund how you want your super dealt with. It is federal law that determines your options and super funds provide forms to record your wishes:
- You can elect to make a ‘non-binding nomination’, which expresses your wishes but still leaves discretion to the trustees. (This is probably not much better than making no nomination at all.)
- You can make a ‘binding nomination’ which must be followed by the trustees. This is a legal document, including your nominations, signed by you in front of two adult witnesses then provided to the trustees.
A binding nomination can include dependants, such as a spouse and children, and also your estate. The definition of a dependant in the legislation is quite narrow, so if you want to provide super money to non-dependants you will need to allocate that money to your estate. Non-dependants, such as parents, siblings and friends, can then be named as beneficiaries in your will.
Superannuation benefits may also include an additional lump sum insurance component, which can be substantial. This only reinforces the need to carefully consider your nomination options.
Both wills and superannuation nominations should be kept under review to ensure the consistency of your financial objectives.
It should also be noted that the definition of ‘dependant’ under federal superannuation law is not the same as under taxation law! Considerations of the tax impact on super lump sums following death might also influence how nominations are made. See my earlier articles on taxation for more on this.
