While this may seem like a morbid question for a Monday morning, dealing with your superannuation is an important part of estate planning. After all, your super funds may represent a sizeable portion of your asset pool when you pass away.
However, unlike your other assets, your super death benefit is not automatically considered to be part of your estate. Your super therefore cannot be dealt with by your Will unless you have directed your super fund to leave the benefit to your legal personal representative (‘LPR’), otherwise known as the executor of your estate.
This is because your Will deals with the assets already owned by your estate such as your savings, property, shares and other personal items. Conversely, your super is held on trust by the trustee of your super fund.
We recommend executing a Binding Death Benefit Nomination form through your super fund to specify who you wish to receive your death benefit. This is a legally binding document which must be submitted to your super fund and updated every three years.
You can choose to nominate either your dependants or your LPR.
Nominating your dependants
Section 10 of the Superannuation Industry (Supervision) Act 1993 (Cth) (‘SIS Act’) defines ‘dependant’ to include your spouse, children or a person with whom you have an ‘interdependent relationship’ with at the time of your death. An ‘interdependent relationship’ describes a close personal relationship between two people who live together and receive financial, domestic and personal support from each other. When you pass away, your super fund will distribute your death benefit to your dependants.
Nominating your LPR
Alternatively, you may nominate your LPR to distribute your super funds in accordance with the terms of your Will. This means that your super benefit forms part of your estate and may be distributed to your beneficiaries.
What happens if a Binding Death Benefit Nomination has not been completed?
If you do not give instructions to your super fund, or if your Binding Death Benefit Nomination is declared invalid, the trustee will have discretion to distribute your death benefit to either your dependents or your estate. Completing a Binding Death Benefit Nomination Form removes this discretion and ensures that your wishes are carried out.
At Perspective Law, we will submit a Binding Death Benefit Nomination to your super fund during the estate planning process. We have the experience to ensure that this form is completed properly to avoid any question of its validity.
Should you be interested in updating your estate planning, please do not hesitate to give us a call on (07) 3832 5555.