Superannuation: The forgotten asset

Considering your superannuation when preparing your Will is a crucial part of your Will and Estate Planning. 

Whether you think you have a lot of assets or not, nine times out of ten there will be more than you expected.  One example of an asset that people often forget about is superannuation. 

After completing a plethora of paperwork when a person starts a new job, superannuation soon goes out of sight and out of mind. That is until a lawyer or estate planner asks you about your super when preparing your Will. 

Super is seen as one of those distant entitlements you will one day receive when you retire. Yet it is also a sum of money that will be paid out to people or a deceased estate upon that person’s death.

Over a person’s working life a lot of super can be acquired and sometimes life insurance will also be provided. It is vital that super is not forgotten and that people seek professional advice when planning for the future. 

It was only last week that we heard a single client, at that point without a will, proudly announce his super was already sorted as he had nominated his nephews and nieces to share in his entitlements.

Unbeknownst to him, such nominations would not be considered valid as they were not his ‘dependants’ for super purposes. And since he had no will, in which he could have requested payments for his nieces and nephews, it was thus highly likely they would receive nothing. 

Add to this the impression people often have when nominating beneficiaries of super. Not unreasonably, many people think that their nominations are binding, that is, cannot be changed without their permission.

Unfortunately, this is not always the case unless a person has correctly completed and had witnessed a binding death benefit nomination form from a super fund who even permits such nominations in the first place.

If a binding death benefit nomination form is not completed then any people who are nominated as beneficiaries are simply an expression of what a person would like to happen with his or her super upon death. This is not guaranteed.

Superannuation funds are set up as trust funds.  A trust is simply a structure for holding assets or benefits on behalf of another. In this way, the trustee of a superannuation fund holds money ‘upon trust’ for one or more beneficiaries. Without completing a binding death benefit nomination form, the trustee has discretion to choose who should benefit and in what proportions beneficiaries should receive.

Here is another example of the importance of seeking professional advice regarding super. The deceased before he died told his three adult children that they would share equally in his estate, as well as his super. The deceased’s spouse did not get on with the deceased’s children. When the deceased died, it was discovered that his property and contents of his bank accounts automatically passed to the spouse because they had been in joint names. 

Both the spouse and the children applied to the trustee of the super fund to have the trustee pay the super to themselves. Unfortunately, the deceased had not prepared a binding death benefit nomination, and so the trustee exercised its discretion and paid 100% of the super to the spouse. 

As a result the three children received very little from their father’s estate (and it is likely that the deceased’s spouse will not include her three step-children as beneficiaries in her estate, and in South Australia they will not be able to make a claim). 

The above examples are two of many that show how easily super can be forgotten and overlooked. Super is a very important asset and can be tailored in ways to best suit your wishes, whether it be to create preferable tax consequences or to simply make sure your chosen loved one do not go without.

For advice about your Will or Estate issue, contact your nearest Tindall Gask Bentley office. You can also start your Will online here.