Superannuation Fund Trust Deeds provide a process by which the trustee can consider your intent as to distribution of death benefits crystallising at your passing. Superannuation death benefit nominations and estate planning are different processes by which you can provide for your intended beneficiaries.
Where does superannuation fit amongst estate assets?
Superannuation accounts are often a significant part of the estate of Australians. They are expected to become more significant over the next couple of decades. The balances in those accounts become accessible on attainment of one of the conditions of release of superannuation benefits. Accessed in this way, they become an asset in the control of the member. Absent a condition of release, they are dealt with at the discretion of the trustee(s) of the superannuation fund.
Exercising their discretion, trustees deal with superannuation account balances at the time of the death of a member. The balance crystallises as the death benefit. The trustee is obligated to deal with it in accordance with the Superannuation Industry Supervision (SIS) legislation. Whilst that legislation requires the death benefit to be paid to persons prescribed under its provisions, the trustee is enabled to take account of member-nominations.
Superannuation death benefit proceeds may avoid the estate altogether. If the trustee has not been directed to pay the death benefit into the member’s estate they will either –
- pay the benefit to eligible tax-dependant beneficiaries; or
- to the legal personal representative of the member as executor of their estate.
Provided the superannuation death benefit has been properly considered in the preparation of an estate plan, the issue regarding estate assets is less relevant.
What death benefit nominations are available to members to make?
Superannuation fund trustees can legitimately consider two types of member-lodged nomination when required to pay a death benefit other than in strict adherence to the legislation. These are –
1. Discretionary Death Benefit Nominations
A discretionary nomination of beneficiaries by a superannuation account holder is non-binding. It leaves the trustee of the superannuation fund to determine who will receive the death benefits available under the account. They must be from the potential range of eligible beneficiaries of the former member.
Trustees will generally be guided by any applicable legislation in this decision-making process. In certain circumstances, they may be directed by a Court as to who should receive those benefits. Whichever the case, the ultimate beneficiaries may not necessarily be the people envisaged by the member to so benefit.
It would be unusual for a superannuation fund trustee to disburse death benefits other than in accordance with the wishes expressed by the member. However, they are obliged to satisfy themselves as to the eligibility of beneficiaries nominated by the particular member. They must be ‘tax dependants’ to receive the funds as a tax-advantaged payment.
2. Binding Death Benefit Nominations
Note:Whether your particular fund allows for binding nominations will depend on the terms of the trust deed governing your fund. Self-managed super funds are of particular interest in this regard.
A death benefit will be binding on the trustees if:
- The nomination form includes the name of each person(s), or class(es) of person (eg spouse), and the allocation of the death benefit amongst nominees – as to percentage or amount – is clear;
- Each death benefit nominee is a legal personal representative or dependant of the member (in which case the death benefit will be paid into the estate of the deceased member);
- The nomination form is dated and signed by the member in the presence of two adult witnesses, neither of whom is a nominee benefiting under the notice;
- The nomination form contains a declaration by the witnesses, stating that the member has signed and dated the nomination form in their presence; and
- The nomination is valid.
What about a reversionary pension?
[Whilst this article deals with ‘death benefit’ nominations it should also be kept in mind that where a pension is in force prior to the death of a beneficiary, with suitable provisions in the relevant superannuation fund trust deed and rules, the need for a death benefit nomination can be obviated by making the pension reversionary to an eligible dependant. For more on this matter, refer to the later article in this series – ‘Estate planning and superannuation assets’.]
What must a member do to confirm, amend or revoke their nomination?
A death benefit nomination is confirmed by giving a written notice to the trustee, in the form prescribed by the superannuation trust deed, signed and dated by the member.
It can also be amended or revoked by giving a written notice to the trustee signed and dated by the member, but the notice must be witnessed in the same manner as a new nomination.
IMPORTANT NOTE: Most trustees require that a Binding Death Benefit Nomination be renewed on triennially: it should be prepared and signed (as outlined above) within 3 years of each anniversary. In some instances, trustees will facilitate a simplified renewal process – which they will communicate directly to the member near to the expiry of each three-year period. It is not necessary for the renewal notice to be signed by the same witnesses as the original nomination form.
Consider this hypothetical case
- To ensure that Graeme’s superannuation benefits were paid partly to his new wife, Helga, and partly to his young children on his death, he put in place a binding death benefit nomination.
- When Graeme died (at a time that his binding nomination was still current), his nomination was binding on the trustee.
- In using a binding nomination, Graeme was able to ensure that his ex–wife was not able to access any of his superannuation.
- Helga and Graeme’s children are taken care of and will not be inconvenienced by any delays in settling Graeme’s estate.
Where can I get help with Estate Planning (including my Will)?
The Continuum Financial Planners Pty Ltd Estate Planning service offers clients:
- working with them to prepare the detailed information required for their appointed estate planning specialist lawyer; who can then
- consider the client’s individual detail in light of their estate planning experience. This will help to design a plan appropriate to the client’s present and known likely circumstances. Where needed
- provision of access to our referral connections of such professionals. (We are happy to refer you, matching their expertise with your circumstances).
Make an appointment…
To avail yourself of this service, contact our office to arrange an appointment –
- by phone, on 07-34213456; or
- at your convenience use our linked Make A Booking facility.
More information about Binding Death Benefit Nominations is available through your adviser at Continuum Financial Planners Pty Ltd. Consideration will be given to your estate planning goals and where applicable, we can assist you to enact an appropriate strategy.
To arrange an appointment with our team –
- Call us (on 07-34213456) or
- at your convenience use the linked Book A Meeting facility.
More about Estate Planning…
This is the fourth in a series of 13 articles on the topic of Estate Planning: further articles in the series seek to bring clarity to some of the issues and implications to be dealt with in fulfilling the three key considerations of Estate Planning – getting the right amount of money, to the right beneficiaries and at the right time; and to prepare you and your family to understand the final plan when drafted. The remaining articles consider –
- Estate Planning outlined;
- Estate planning and flexibility in the modern Will;
- Asset protection using Estate Planning;
- Estate planning and Business Succession planning;
- Capital Gains Tax impact on estate planning;
- Estate planning and family loans;
- Estate planning and company-owned assets;
- Estate planning for a SMSF trustee;
- Estate planning and superannuation assets;
- Estate planning with a testamentary trust;
- Estate planning for younger children; and
- Estate planning dependent on a valid Will.
(This series was first posted to our website over a period from late-2011 through early-2012. It has been occasionally been refreshed/ updated, most recently in December 2024.)
