InvestSMART

Super: who gets it?

The strategy: To make sure my super goes to who I wish if I die.

The strategy: To make sure my super goes to who I wish if I die.

What's the problem? Can't I just deal with my super in my will? It doesn't work like that, according to William Buck wealth advisory director Chris Kennedy. Legally, your super doesn't form part of your estate when you die, so it isn't something you can allocate as part of your will. If you want to be specific about who gets your super, you must deal with it separately by making a binding death benefit nomination if your fund allows it.

What's that? It's a written directive on how your super (and any life insurance you had through your fund) should be distributed if the worst happens. While you may tell your fund who should receive your super, this is not necessarily what will happen unless a binding nomination is made. Kennedy says a binding nomination is a legal document that must be signed by two witnesses and renewed every three years (after which it will lapse). The two witnesses cannot be beneficiaries. Super funds are not legally required to offer binding nominations, though a growing number do. Kennedy says not all super fund trust deeds allow for binding nominations and while standard nomination forms are available for self-managed funds, these might not conform to the trust deed's requirements. So it is important to ensure everything is done correctly.

What happens if I don't make a binding nomination? Kennedy says your fund's trustee has the discretion to distribute your benefits and to act in your best interests. While it will often act in line with your expressed wishes, there may be instances where money is distributed to people you wouldn't have wanted, or in different proportions to what you desired. While this is more likely to be a problem with public funds, where the trustee doesn't know you from Adam, Kennedy says problems can also occur with self-managed funds if the remaining trustees decide they know better than you.

I don't get it. How can the fund justify not following my wishes? Death benefits are the second-biggest area of complaints brought to the Superannuation Complaints Tribunal and usually involve people who believe they should have benefited but missed out, or beneficiaries who received less than they believe they should have. Kennedy says problems are more likely to occur when there are second families and multiple potential beneficiaries. If someone comes forward to claim they are entitled to benefit, the trustee will generally take their claim into account.

Can I nominate anyone I wish as a beneficiary? Legally, you can only nominate a dependant or a legal personal representative (your estate) as a beneficiary of your super. Kennedy says the definition of dependant now includes partners in same-sex couples and people who are in an "interdependent relationship" with you, along with traditional dependants, such as your spouse and children. That interdependent relationship can also include people living together in close personal relationships in which one (or both) are dependent on the other financially or through the provision of some type of personal care. If you want to leave your money to a non-dependant, you must nominate your estate as the beneficiary of your super and distribute the benefit to them through your will. However, if your intended beneficiaries will need to access the money quickly, Kennedy says it's generally better not to direct the money through your estate as payment will be delayed until probate is obtained.

Can these people receive my death benefit tax-free? No. Kennedy says that while dependants can receive your death benefit tax-free, the definition of dependant is narrow for tax purposes. Adult children, for example, are not regarded as dependants, so it might be better to provide for them through other assets.


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