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The assets that make up your estate may include property, bank accounts, investments and superannuation.
How your estate will be distributed after your death will depend on who you nominate to be beneficiaries in your Will. That is, your estate minus your superannuation – unless you have specifically nominated your estate to be the beneficiary of your superannuation.
In that case, your Will can determine how your estate will be split.
But if you haven’t nominated a beneficiary for your super then it will be up to the superannuation trustee to determine where your superannuation will be paid and who will benefit.
Who can be a superannuation beneficiary
There are rules about who you can nominate to be your superannuation beneficiary
A beneficiary can only be a dependant or personal legal representative – the person appointed as executor or administrator of your estate – or a mix of these.
A dependant may include:
- your spouse (including a de facto spouse)
- your children (regardless of age)
- someone financially dependent on you (fully or partially)
- someone you had an interdependent relationship with.
An ‘interdependent’ relationship is a close personal relationship with someone you probably live with where you provide financial support to the other, and where one of you provides domestic support and personal care to the other.
What are binding nominations, non-binding, reversionary beneficiaries
To ensure your superannuation reaches the right people after your death you will need to have nominated a beneficiary.
There are two types of nominations – binding, which is legally binding, which the Trustee must follow, or non-binding which isn’t legally binding but provides the Trustee with directions on how you would like your benefit to be paid.
If you select a binding nomination, you should also ensure that either you update this every three years or that you make it a non-lapsing nomination.
Non-binding nominations may be followed by the Trustee according to your wishes but ultimately is left to the Trustee’s discretion.
If you are receiving an income stream or annuity from your super and you have not nominated a reversionary beneficiary, the payment will cease on your death and the remaining balance or lump sum value will be distributed to your beneficiaries, in line with your binding nomination.
You may choose to allow your beneficiary to continue the pension or annuity – providing they meet an eligibility test, similar to a superannuation beneficiary.
Why is it important that you nominate someone
It’s important that you nominate someone as your beneficiary as your superannuation is not automatically counted as part of your estate. There have been cases where a person’s Will allocates the estate according to their wishes but, because they have not named a specific beneficiary with their super fund, someone has made a claim on the person’s super – for example, an estranged spouse. The Trustee will have final say on how it is allocated so you should make your wishes known.
It is also important to consider the tax implications of who to name as your beneficiary if it is not one of the people listed above. If you are leaving your estate to various beneficiaries, a financial planner can explain the implications of the way you divide your assets including your superannuation.
Why you should review your beneficiary regularly
Like all your legal and financial matters, you should review regularly to make sure you are still in the same situation as you were when you last checked these.
In the last three years, have you married, divorced, had children, lost relatives? If you have done any of these things it is likely you will need to change your beneficiaries for your Will, your superannuation and even your insurance.
Once again, your Will does not automatically include your superannuation beneficiary – so make sure that you update both when there are any changes, and review regularly.
