Since the introduction of compulsory superannuation contributions by employers relating to all workers, there has been a very large increase in superannuation holdings in Australia.
There are also the holdings held in self-managed superannuation funds which have also increased and there appears to be some rivalry between the industrial funds and the Retail Funds with the Industrial Funds being set up by employers and unions and the retail funds being the insurance companies who have shareholders.
There is significant confusion amongst people as to how to deal with superannuation in the event of the death of the superannuation holder particularly as many people have not one superannuation policy but sometimes quite a number. It is complicated by the fact that many of the funds, particularly the industry funds, have death benefit insurance of a significant amount. Sometimes people have many policies and quite often they lose contact or lose information they have relating to such funds and it is then necessary for them to make contact with AUSfund or the ATO who have superannuation search tools using a tax file number. If somebody wants to transfer their unclaimed superannuation fund monies to their preferred fund they will need their superannuation fund membership number.
Binding death benefit nominations are a continuing problem with the funds as some funds still do not have the facility for a policy holder to make a binding death benefit nomination so that the fund has to comply with the nomination. If a death benefit nomination is given which is not binding, then the trustee can make a decision to make payments differently from the death benefit nomination, provided of course that the payments are made to what are called statutory dependants as defined in definitions under the Superannuation Industry (Supervision) Act 1993. If there are no statutory beneficiaries then the payment needs to be made to the legal personal representative which is the executor or administrator of the Estate as nominated in the will or by the Supreme Court in its probate jurisdiction.
Under the legislation, a binding death benefit nomination will lapse after three years or for such lesser period as is stipulated under the superannuation deed. Hence, the necessity for renewing such binding death benefit nominations as they lapse.
It has now become more common for superannuation fund deeds to allow for what are called non-lapsing binding death benefit nominations which means they do not lapse and continue on like a will until such time as a further binding death benefit nomination is prepared in substitution.
Non-lapsing binding death benefit nominations and death benefit agreements are also common in self-managed superannuation funds. A death benefit agreement is prepared with the trustee of the fund being a party to the agreement.
It is always important for people to see their accountant relating to superannuation as there are taxation ramifications particularly as there is payment of tax (usually 15%) in relation to deductible contributions to the fund if the monies are to be paid to beneficiaries who are not tax free beneficiaries. Tax free beneficiaries are the spouse and actual financial dependent children under the taxation legislation. It is sometimes more convenient for people to make a binding death benefit nomination to the legal personal representative which means the money is paid to the Estate. This is particularly beneficial where there is a testamentary trust set up under the will where monies are held in trust for the beneficiaries, particularly minor beneficiaries (persons under 18 years of age).
Although you should consult with your accountant, if superannuation monies are paid to an Estate then the tax-free benefit can still be retained if paid to a tax free beneficiary.
It is very important that you discuss your superannuation with your solicitor when preparing your wills and that you get advice from your accountant or a specialist accountant relating to taxation aspects of your superannuation fund. Certainly, after your death, your legal personal representative/executor and your accountant will need to work out what tax is payable.
If you would like Jack to address a particular legal issue, send your request to jack.blaxland@ticliblaxland.com.au
This article is intended to be for information and educational purposes only and cannot be relied upon as legal advice. The information may not apply to your circumstances or to your particular situation. If you need specific advice or you have any questions, we welcome you to contact us directly.
