One of the many important elements of prudent wealth management is to have your ‘succession plans’ well documented and understood.
Personal situations warranting nomination of beneficiaries
In a personal situation, nomination of beneficiaries is a key element of a well-structured Estate Plan. An Estate Plan encompasses a process that ensure that your estate is ultimately distributed:
- to the beneficiaries that you nominate (the right people);
- in the amount that you nominate (the right amount/ share); and
- at the time of your choosing (at the right time).
Superannuation
Most superannuation benefits are able to be allocated and by-pass the estate administration process. In doing so, tax benefits can be to your beneficiaries’ advantage; but there is a process to be followed.
When nominating beneficiaries to a superannuation account, two factors that may require consideration are:
- are any of the proposed beneficiaries to your estate likely to benefit from a tax ‘concession’?
- will the death benefit nomination disturb any estate equalisation intentions more broadly?
Insurance
Most insurance policy benefits can also by-pass the estate administration process. If this suits your estate planning, be aware of correct procedures being required to achieve your final goals.
If you want to benefit particularly beneficiaries directly from either of these sources (superannuation or insurance) then you must ensure that those beneficiaries have been formally nominated in a way acceptable to, and binding on, the trustees of those accounts.
Getting the three ‘rights’ right
When it comes to ensuring that the right people receive the right amount of money and at the right time, you must ensure that the right documentation has been attended – and monitored and updated on a regular basis.
The consequences of getting it wrong include:
- The wrong beneficiary receives money that should go to your dependents. Not a good thing if there has been a re-marriage for example – whether of yourself or a former spouse;
- Tax that could be avoided becomes payable because the recipient of the benefit isn’t appropriately dependent on you;
- Legal costs for the Executors in sorting out challenges to your estate could result in lesser distributions to those for whom you wanted to provide; and
- Potential for there to be ‘un-even’ distribution benefits because of tax consequences or misallocation of accounts.
In our series of Estate Planning articles we have dealt with this matter and again commend the regular review of all estate planning elements (including Wills and Enduring Power of Attorney appointments): your financial planner can assist in these matters and will often be able to help you understand the process more clearly.
Expertise at Continuum Financial Planners
Our team of advisers is well qualified and experienced to guide on the nomination of beneficiaries to achieve your succession planning goals. To discuss the possibilities, or to make and appointment, phone our office (07-3421 3456), or directly Book A Meeting at your convenience.
Originally published in July 2012, this article is occasionally refreshed/ updated, most recently in July 2024.)
