This information has been provided by
Australian law firm, Slingsby's Legal Solutions.
Superannuation and your Will
Since superannuation became compulsory in the 90's, it
has become one of the major assets that you will hold in
your lifetime. Because it is such an important asset
(and often has life insurance attached to it, making it even
more significant) it is important to know how it is dealt
with if you should pass away.
Many people think that their superannuation will be
automatically dealt with in their Will, but this is not
necessarily the case.
Superannuation is a trust structure - this means that there
is a Trustee. For employer schemes this is often a
large institution, for self managed funds, it could be a
person or a private company. Members of the fund (who
are entitled to the contributions) are called the
beneficiaries.
When a member of the fund dies, the trustee of the superfund
has a discretion (if this power is given to it by the Trust
Deed, which it normally is) to pay out the super
entitlements as the Trustee sees fit. The trustee does
not have to follow the wishes set down in the deceased
member's Will (NOTE: In NSW, the superannuation does
form part of the Estate). The Trustee will normally
only deviate from the Will when they think that all of the
deceased member's dependants have not been adequately taken
care of in the Will.
Example:
Harry is married with 2 young children (aged 3
and 5 years old). At the staff Christmas party Harry
meets Sally, and falls in love. He divorces his wife
and marries Sally. Harry and Sally start a new family
and make Wills leaving everything to each other. Ten
years later, at the staff Christmas party, Harry has a heart
attack and dies whilst in the stairwell with his secretary,
Amanda.
Sally is left with 2 children. The house has a
mortgage on it, but there is Harry's payout of $600,000
which should pay out the house and give Sally some savings
to live off while she raises the kids.
The Trustee looks at Harry's Will, and decides that the 2
children from his first marriage (they are now 13 and 15
years old) are dependents with financial needs (such as
schooling). The super payout is split 40% to the first
2 children and 60% to Sally and her 2 children. After
paying the mortgage, Sally has little left.
What should I do?
Make
a Will - if you don't have one, you haven't even reached
first base! Try and be fair in your Will to all
dependants. This will avoid problems later.
Your Super Trustee is less likely to cut across your
Will, and it reduces the risk of expensive litigation
against your estate (brought by disgruntled dependents
who have been left out).
You
can consider making a Binding Nomination with your
Superfund (if your Superfund offers this service).
This form allows you to nominate beneficiaries of your
choice to take your super entitlements if you pass
away. The Binding Nomination (it must be this
special form) is legally binding on the Super
Trustee. The people you can nominate are:
spouse,
ex spouse or de factor spouse
children
other
financial dependents
your
legal representative (as a trustee)
It
lasts for 3 years, and then you have to renew it.
NOTE: For NSW residents, a binding nomination may
not override the wishes in your Will. So cover your
wishes for your super contributions in your Will.
