It’s a common misconception that a last will and testament dictates the distribution of all assets, including superannuation, upon one’s demise. Most envision that upon their passing, their tangible assets – such as homes, vehicles, savings, furnishings, investment portfolios, and superannuation funds – will be allocated and disseminated according to the directives explicitly stated in their Will.
However, the reality diverges significantly when it comes to superannuation benefits.
Contrary to popular belief, superannuation benefits do not inherently integrate into your estate to be addressed via your Will upon death. Instead, these particular assets are subject to the specific rules and regulations of the superannuation fund alongside overarching legislation. This means that the future of your superannuation remains under the jurisdiction of these governing entities, even after your passing.
To navigate this complex terrain and ensure your superannuation assets are bestowed upon your intended beneficiaries, engaging with a process distinct from traditional Will drafting is imperative. This involves creating and submitting a Binding Death Benefit Nomination (BDBN) to the trustee overseeing your superannuation fund. This legally binding document ensures that the trustee distributes your superannuation according to your explicit wishes, as articulated within the BDBN.
In the absence of a BDBN or a comparable legal instrument, the allocation of your superannuation may default to the discretion of the fund’s trustee. This scenario is far from ideal, particularly in the context of Industry and Retail Superannuation Funds. Trustees, often lacking personal knowledge of the member’s familial ties, individual circumstances, or specific desires, may make decisions that deviate from the member’s true intentions. For instance, even if your Will specifies that your superannuation should benefit your children, a trustee, uninformed by a BDBN, might allocate these funds to a spouse or a legally recognized defacto partner.
Adding another layer of complexity, it’s vital to acknowledge the tax ramifications that accompany these decisions. How you instruct the superannuation trustee to distribute your assets can lead to considerable tax implications. As such, crafting a BDBN or similar documentation should be undertaken with careful consideration of these potential financial consequences. Seeking guidance from financial advisors or legal professionals is highly recommended to navigate these intricate decisions, ensuring that your superannuation benefits are distributed according to your wishes, are tax-efficient, and are aligned with the broader goals of your estate planning.
Should you require further information in relation to superannuation or death benefits, please feel free to contact Peter Quinn by submitting an enquiry or calling us on +61 2 9580 9166 to book an obligation free appointment.
The information in this document does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser.