Many people assume that estate planning is only necessary once they have substantial assets or something significant to leave behind. However, when you first started working, you likely joined a superannuation fund. Ideally, this fund has been growing steadily throughout the years. This means that you do have an asset worth considering in your estate planning, and it’s important to think about who you want to leave it to.
Understanding the Importance of Superannuation in Estate Planning
We all hope to reach retirement and enjoy the rest of our lives using our superannuation funds. However, life does not always go as planned, and unfortunately, many Australians pass away before drawing on their superannuation. You might believe that if you have a valid will, your superannuation funds will be disbursed to the person or people you have nominated as your beneficiaries in your will. However, it may come as a surprise that your superannuation does not automatically form part of your estate.
Binding Death Benefit Nominations: Securing Your Wishes
To ensure that your superannuation goes where you would like it to, you need to have completed a binding death benefit nomination with your superannuation fund. If you do not have a valid binding death benefit nomination at the time of your death, the Trustee of your superannuation fund will decide who receives your super.
Trustee Guidelines for Disbursement
When deciding who is to receive your superannuation benefits, the trustee must follow specific guidelines. They can only disburse the funds to the following class of people:
- Your spouse or de facto spouse
- Your children
- Someone who has an interdependent relationship with you
- Anyone financially dependent on you at the time of your death
- Your legal representative (your estate)
Types of Death Benefit Nominations
Non-Binding Death Benefit Nomination (BDN)
This is the most common type completed when you first join your super fund, and as the name suggests, it is not binding on the trustee. The trustee will take your nomination into consideration when disbursing the funds. However, the downside to a non-binding death benefit nomination is that you do not have control over the amounts disbursed to each person. The end recipients may not reflect your true wishes.
Binding Death Benefit Nomination (BDBN)
A BDBN can either be lapsing or, in some funds, non-lapsing. If the nomination is lapsing, your super fund will generally contact you every three years to confirm your wishes.
Benefits of a Binding Death Benefit Nomination (BDBN)
Control: You can leave your superannuation to beneficiaries as you wish, even if it may not typically be considered fair or reasonable.
Avoid Delays: If you have nominated a person, the trustee can pay the funds directly to the nominated beneficiary without going through probate.
Tax Benefits: There can be tax benefits to nominating your beneficiaries directly; you should speak to your accountant for further details.
Certainty: You have the certainty that your wishes will be followed, even if your circumstances change.
Aligning Your Will and Superannuation
It is important to consider your superannuation when you are finalizing your will, so there are no conflicts or contradictions that may cause disputes when it comes time for your loved ones to disburse your assets.
Key Considerations for Estate Planning with Superannuation
- Review Your Beneficiaries Regularly: Life changes such as marriage, divorce, the birth of children, or the death of a loved one can affect who you want to nominate as beneficiaries.
- Understand the Tax Implications: Different beneficiaries may face different tax implications. For instance, adult children may be taxed differently compared to your spouse.
- Seek Professional Advice: Estate planning can be complex. It’s advisable to seek advice from financial advisors, accountants, and lawyers to ensure your wishes are effectively carried out.
Estate planning is not only for the wealthy; it is for everyone who wants to ensure their assets, including their superannuation, are distributed according to their wishes. By taking the time to complete a binding death benefit nomination and regularly reviewing your estate plans, you can provide peace of mind for yourself and your loved ones. It ensures that your hard-earned superannuation benefits are passed on to the people you care about most, according to your intentions.
To ensure your superannuation and other assets are protected and distributed according to your wishes, book a complimentary consultation with our experienced team at NB Property Law. Our expert lawyers will guide you through every step of the estate planning process, offering personalized advice tailored to your unique needs.
Reach out to us at NB Property Law to schedule your consultation and ease the burden of estate planning. We look forward to assisting you.
Written by
Kayleigh Swift, Associate
NB Property Law
[email protected]
(07) 3876 5111
Kayleigh Swift is a Director of our Property team who showcases her expertise in Commercial and Residential property matters.. With a high level of experience in commercial and retail leasing, voluntary and involuntary purchase and sale acquisitions and property development matters, Kayleigh provides practical advice to ensure smooth property transactions.
Louise Misfud, Lawyer
NB Property Law
[email protected]
(07) 3876 5111
Louise Misfud is a Lawyer in our Property team who assists with various conveyancing, leasing and wills and estates transactions. Louise is very experienced in residential conveyancing and estate planning and administration and is a problem solver. She always provides effici