The importance of estate planning in your wealth plan cannot be under-stated and here we want to highlight the importance of your death benefit nomination in your superannuation.
Why? Because;
- Very few of us can claim we know when we are going to die
- Your super (for many people) is likely to be the largest asset you own aside from your family home.
- So who you nominate to receive your death benefit from super is a very important decision.
Out of sight, out of mind – Unfortunately many people pay very little attention to their superannuation until they get close to retirement.
Planning is about reducing your risk exposures to unforeseen events hence who you make your superannuation death nomination to is extremely important.
Did you know that super funds;
- Are required by law to pay the member’s death benefit to a dependent or a legal representative, such as your estate/Will.
- Can only consider paying someone else if they can’t locate either a dependent or estate/Will.
So if you inadvertently make a death benefit nomination in favour of a non-dependent then the super fund trustee has the discretion to determine who will receive the payout.
Super funds have been shown to favour paying a dependent rather than a person’s legal personal representative (their estate).
What you need to know:
- Under superannuation law, a dependent is the spouse of the person, any child of the person and any person with whom the person has an interdependency relationship.
- Where a person has no dependants, their superannuation can be paid to their legal representative, i.e. paid under the terms of their will.
- Leaving the decision to the super trustee could lead to a disastrous outcome.
- Some nominations lapse after three years and therefore become invalid.
- If you intend to pay your death benefit to one dependent it is possible a contested claim from other potential dependants can arise.
What can you do?
- Prepare your Will, Power of Attorney and Guardian documents, this is important. If you have no “super dependents” this is essential.
- With a valid Will you can safely nominate your legal personal representative i.e. your Estate/Will to receive and distribute your super death payout.
- If your prefer to nominate a person ensure they fall within the definition of a dependent e.g. a parent, friend or a niece or a nephew may not.
- Seek professional advice to ensure your nomination is valid.
Contact VJC Wealth and we will advise and assist you.
This recent case highlights how this can go terribly wrong.
