Despite popular beliefs to the contrary, did you know that your superannuation death benefits do not automatically form an asset of your estate when you die? This means that, potentially, one of your most valuable assets is not dealt with under the terms of your will (even if you refer to it in your will).
Unless you execute a Binding Death Benefit Nomination (BDBN) with the trustee of you superannuation fund, the ultimate discretion of who gains access to your death benefits remains with the trustee. A BDBN must be duly executed to be binding on the trustee and this ordinarily requires a written document to be signed and witnessed by two witnesses who are over 18 years and are not beneficiaries of the fund. If the requirements of the trustee are not adequately met, your nomination is not binding. The BDBN will lapse after 3 years and will need to be renewed to remain binding.
And, don’t be misled into thinking that if you check a box on the trustee’s website, you have certainty over where your death benefits will end up. This is likely to be a non-binding death benefit nomination, which means that whilst the trustee may take these wishes into account in making its decision, it is not legal bound to it.
Who can I nominate?
Under the legislation, super death benefits can only be paid to the member’s superannuation dependant or personal legal representative (i.e. executor of their estate). If the benefits are paid into the member’s estate, the death benefits can then be distributed in accordance with the terms of the will. This can have implications is terms of both taxation and also in terms of forming part of the pool of assets that are open to being challenged by a family provision claim. For these reasons, it is important to get both legal and financial advice in making these decisions so that it does not result in unintended consequences.
If you would like to discuss your estate planning with our estate planning lawyer, please phone our office on (02) 4322 6666 and make an appointment with Naomi Morris today.
The content of this article is provided as general information only and is not intended to substitute legal advice.