Peter and Jane have modest assets with a large proportion consisting of the balance of their superannuation funds. They have recently updated their wills and wish to ensure that their super is properly addressed. Their super does not form part of their estate and cannot automatically be dealt with under the terms of their wills. In order to ensure that their super ultimately goes to their intended recipients, Peter and Jane must execute a binding death benefit nomination in addition to executing their wills.
Most super funds have a requirement that a nomination is only valid for 3 years. This means that if the nomination is not renewed within this time, the nomination “lapses” and the balance of the fund is dealt with at the sole discretion of the trustee of the superfund. The trustee has no knowledge of Peter and Jane’s family and could lead to unintended results.
A valid nomination can only be made in favour of defined “dependents”. Such dependants are spouses (including de facto and same sex), children (including a spouse’s children or step children) and people in an “interdependency relationship”. This means people who live together and provide each other with financial and domestic support. Peter and Jane can elect to nominate their estate as the beneficiary of their super funds. To do this, they would record the nominee as LPR (legal personal representative). The effect being that the funds would then be able to be dealt with in accordance with the wishes contained in their wills.
There are taxation consequences when super funds are paid to children who are over the age of 18 and no longer dependant. Peter and Jane have one child who is a minor and they consider whether the whole of their super should go to that child to avoid unnecessary taxes, if they were both to pass away during the child’s minority. An adjustment clause in their wills can then be used to ensure equality between all the children.
Superannuation is a complex area of the law and your individual circumstances may differ. This column cannot be relied upon as legal advice.
