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What happens to your Superannuation when you die?

Advice, Superannuation ,

You would assume it is a part of your estate, correct? However, that is not the case.

Grab a cuppa and let us take you through the ins and outs to ensure your superannuation lands into the hands of those you desire.

Superannuation can be a major asset for many Australians. It is therefore essential that in preparing your Will and other end-of-life documents, that you take into consideration your superannuation.

As you are no doubt aware, there are a large variety of superannuation funds, each with their own rules which must be adhered to.  Each retail fund, industry fund and Self-Managed Superannuation Funds (SMSF) generally will have its own Trust Deed and/or rules that must be adhered to.

When you die, your superannuation fund does not automatically form part of your estate. Did you catch that? Your superannuation does not automatically become a part of your estate. Furthermore, it may also be that your superannuation fund does not end up going to your preferred beneficiaries. This may come as a shock to you.

All Superannuation funds are held on trust and like all trusts, are not assets of your estate. This is why you need to take action and implement the right steps to attain your desired outcome.

You may think you can use your Will to direct the actions of a trustee of your superannuation fund. This is not the case.  Most superannuation funds require you to nominate a beneficiary using the fund’s prescribed forms. This allows you to make either a binding or a non-binding death nomination.  If you are not sure what is a binding or a non-binding death nomination (and the difference between them), keep on reading and we will explain them for you.

Binding Death Benefit Nominations

A binding death benefit nomination (BDBN) directs the Trustee of your superannuation fund about where you want your superannuation to go after you die. If you make a BDBN, the Trustee is obliged to follow the nomination, provided the beneficiary you nominate qualifies as a superannuation beneficiary, and, the Trustee considers the BDBN to be valid. A valid BDBN normally requires strict witnessing requirements and is required to be updated every 3 years.

Great care must be taken to ensure that the BDBN is carefully prepared and signed so that it fits within the superannuation fund’s Trust Deed and/or. This is particularly important in SMSFs where the preparation of inadequate BDBNs has resulted in significant failures and costly litigation in recent years.

If you have a SMSF, there are generally also issues relating to Trustee and Membership control which require careful and regular attention as part of any estate planning process.

Non-binding Death Benefit Nominations

If you make a non-binding death benefit nomination, the Trustee of your superannuation fund should take your wishes into account, but the Trustee is not legally obliged to follow them. The Trustee of the superannuation fund will have discretion as to where the proceeds of your superannuation are paid (based on your wishes, the needs of your dependants, the terms of the deed governing the superannuation fund and the law).

Obviously, the Trustee cannot pay your superannuation fund to just any person.  However, if you have a made a non-binding death nomination, you should be aware that the Trustee may distribute your superannuation proceeds to a different beneficiary.

Who can receive my Superannuation after I die?

As above, only certain beneficiaries qualify as superannuation beneficiaries. According to the SIS Act, Superannuation beneficiaries must be paid to:

  • your legal personal representative (ie. the executor); or
  • a “dependant”

A “dependant” refers to your spouse (including a de-facto partner and/or a same sex partner), your child (of any age, including in certain circumstances a step-child) and those in an “interdependency” relationship with you. An “interdependency” relationship might include a situation where you have:

  • a close personal relationship;
  • you live together;
  • one or more of you provide financial support to the other; and
  • one or more of you provides the other with domestic support and personal care.

Even if your relationship does not satisfy all the above criteria, if one or more of you suffers from an intellectual, physical or psychiatric disability, a relationship of “interdependency” may still exist, so you should obtain further advice if you are considering this issue.

If you do not have any dependants, the trustee of your superannuation fund will direct those funds to your estate.

If the Trustee decides to pay your superannuation funds to your estate, and you do not have a Will, your estate affairs will be complex.  As a result, your loved ones will most likely need to engage a Lawyer and your estate will likely incur higher legal fees – adding stress on family and friends during stages of grief, it can be rather unpleasant.

This highlights the importance of estate planning and why you should invest the time to seek legal advice to ensure your affairs are in order. Contact us via our website or call us on 08 9445 2686 if you have an enquiry and we will get back to you. We can discuss your situation and what legal services would be beneficial to you.

 

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Never too young to make a Will

Advice, Wills , ,

You might think you are too young to make a Will, or perhaps you just have not had time. Well, if you are over 18, you are not too young to make a Will, and everyone should make it a priority.

If you die without a Will, it is not the case (as many believe) that your estate will “go to the government’’. Rather, your estate will be dealt with according to a legal formula outlined in the Administration Act 1903 (WA).

Determining who is to benefit from your estate, and who is entitled to make the application for ‘Letters of Administration’ can be complicated and time consuming. Further, the statutory formula can often be very different from the way most people would leave their estate, if they had made a Will.

This is particularly the case if you leave young children behind. Your children are likely to inherit part of your estate, along with your spouse, if you have them.  However, if your children are under 18, the complications become very significant. There will be a need for someone to act as a surety, who will guarantee that they will make good any financial loss that a minor beneficiary might suffer, as a result of the applicant’s actions.

In our experience, finding a person willing to act as a surety can be very difficult. Further, your spouse’s access to funds might be severely curtailed as a result of a large part of your estate being held in trust (possibly for years) for your children.

If you are single without any children, your estate is likely to go to your parents and/or siblings. You might be happy with that, but you might prefer a friend or a charity to receive your hard-earned assets, rather than your brothers or sisters (who perhaps in your view don’t really need it!).

Blended families, children with disabilities or personal difficulties, and estrangements within families are all things that require particular consideration.

Shirley and Emily are familiar with the many varieties of issues which can arise in this area, and are happy to talk with you about them.

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When should you update your Will?

Advice, Wills

Do you already have a Will? If so, when should you update it?

You may need to update your Will if any of the following changes have occurred to your circumstances:

  • You have married or divorced since you made your last Will: If so, you now effectively have no Will because marriage or divorce automatically revokes a Will.
  • You have started living with someone: If so, you should be aware that people who qualify as a defacto partner may be entitled to bring a claim against your estate if you do not provide for them.
  • You have had a child, or more children (via birth or adoption): Does your current Will consider all of your children? If you are unsure, you should engage a Lawyer for advice.

Other situations that may require an update of your Will are:

  • If your executor has died, become ill or incapacitated: If your Will does not provide for an alternate Executor, you should update your Will to avoid complications with your Will after your death.
  • You own a business, or have a family trust, or you have a self-managed superannuation fund: It is important to ensure your business, family trust and/or self-managed superannuation fund has the appropriate provisions in place to ensure the continuity of the entities on your death.
  • Overseas Will: If you have overseas assets or a Will from another country, you should seek legal advice about how your Australian and overseas assets can be dealt with without causing complications after your death.

If any of the above changes have occurred, and you have not updated your Will accordingly, please contact us and we will be happy to assist you.

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Why (some) Lawyers love homemade Wills!

Advice, Wills ,

‘Why can’t I draft my own Will?’ you might ask.

Well you can. In fact, there is an old joke, that Lawyers love homemade Wills because lawyers make so much more money after your death, when things go wrong!

It amazes us that some people don’t want to pay a relatively modest amount to engage a lawyer to prepare their Will, and yet will pay their accountant perhaps thousands of dollars every single year to assist with their financial affairs.

If you do decide to draft your own Will, you must accept that you are taking a risk. We practice exclusively in the area of Wills and Estates and this means we frequently see the sometimes-disastrous results from homemade Wills.These can be caused by technical problems, when the will drafter has not appreciated the importance of various Will-drafting conventions, through to errors made at the time of execution of the Wills. It is frustrating for us, because these difficulties could so easily have been avoided if a competent Wills lawyer had been consulted in the first place. As a result, thousands of dollars of estate funds are spent in legal fees and inevitably there is a very long and stressful delay in distributing the assets.

We both have enjoyed many years’ experience in an interesting but rather technical area of the law is. Making a Will is a very personal (and sometimes emotional) process and at times a difficult task for people to face.

However, we take pride in our ability to make the process as painless as possible. We love seeing the relief our clients feel when they have their affairs in order.

Contact us if you don’t want to risk your estate by using a homemade Will.

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