Superannuation and your Will

Superannuation is an important part of estate planning. Attending to your superannuation is vital to ensure quick, efficient administration of your estate.

Can you give me a brief reminder of how superannuation works? For most people, superannuation works like this – a percentage of your wages is paid by your employer to a superannuation fund (these are called superannuation contributions), and that superannuation fund then controls those contributions. Legislation dictates how and when you can access your contributions. You need to satisfy a condition of release (which, for most people, will be when they permanently retire from the work force) before you can access your superannuation.

I already have a Will – does my Will cover my superannuation benefits? No. The only way to direct your superannuation fund to pay your superannuation in accordance with your wishes is to prepare a Binding Death Benefit Nomination.

So what happens to my superannuation benefits if I die with money still in the fund? Your superannuation fund is in control. If you have prepared a Binding Death Benefit Nomination which is valid at the date of your death, then your superannuation fund will follow your wishes. If not, your superannuation fund will decide how your superannuation benefits will be paid. They must pay your superannuation to either your estate, or to your superannuation dependants (ie. your spouse, your children, or someone with whom you are in a financially interdependent relationship), and typically will gather evidence from your family and friends before making a decision.

I have nominated beneficiaries – is it binding? Many funds allow you to prepare either a Non-Binding Nomination or a Binding Death Benefit Nomination. Legally, a Binding Death Benefit Nomination is only valid if you sign it in front of two adult witnesses. You may have nominated your beneficiaries online, or filled out a basic form which you signed and returned to your superannuation fund. Both of these options are non-binding. Your superannuation fund might take it into account in their decision making, but are not bound to follow your wishes.

Jargon-busting – What is the difference between ‘member balance, ‘death cover’, and ‘death benefits’? If you look at your member statement, which you should receive from your superannuation fund at least once a year, you might notice that you have a member balance, as well as death cover, as well as a death benefit.

Your member balance is the amount you have contributed into superannuation over the years.

Death cover is an additional amount payable if you die – exactly like life insurance. Many superannuation funds offer death cover as a default benefit of being a member of that fund.

Your death benefit is the amount which is paid out if you die before retiring, and is made up of your contributions, plus your death cover.

I have a self-managed superannuation fund. What do I need to do?  Seek good advice about how your superannuation will be dealt with after your death. It will depend on the rules of your particular self-managed superannuation fund.

For advice and assistance with making a Will or Binding Death Benefit Nomination, phone Trent or a member of the Wills and Estates legal team at Robertson Hyetts Solicitors on 5434 6666 or 5472 1588 for an appointment.