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WILL MY SUPERANNUATION FORM PART OF MY ESTATE?

Superannuation death benefits do not automatically form part of an estate and therefore cannot be primarily dealt with in a Will.

The Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act) and the Superannuation Industry (Supervision) Regulations 1994 (Cth) (SIS Regulations) set out how and to whom the superannuation death benefit can be paid and provide the superannuation trustee with an absolute discretion, except in situations where that discretion is subject to the terms of any reversionary pension or a binding death benefit nomination (BDBN).

The trustee of a superannuation fund must follow the directions of a person’s BDBN but only if that nomination complies with the SIS Act and the SIS Regulations. There are a number of legislative requirements for a BDBN to be valid and binding on the trustee, for example, it must be in writing; be signed and dated by the member in the presence of two witnesses, each of whom has turned 18, and neither of whom is mentioned in the nomination; and contain a declaration signed and dated by the witness stating that the notice was signed by the member in their presence.

BDBNs do not take effect until they are received and accepted by the trustee of your Super Fund. A typical binding death nomination ceases to have effect at the end of three years after the day it was signed, or a shorter period fixed by the governing rules, but can be renewed, amended or revoked. Some funds permit a member to make a non-lapsing binding death nomination.

If there is no binding nomination in place, the trustee’s discretion can be exercised in favour of the estate and the terms of a member’s Will determine the manner of distribution. The SIS Regulations provide that if a  trustee has not, after making reasonable enquiries, found either a legal personal representative or a dependant of the member, then the trustee may pay the benefit to any individual. If the trust deed also allows to do that, then the trustee will investigate and apply its discretion on whom gets the benefit.

If a member dies without a valid BDBN and without a valid will, the trustee will exercise their discretion to pay the benefits to the estate and that estate will be distributed in accordance with the intestacy provisions. Since the legislative provisions have no bearing on the binding nomination process in Self-Managed Superannuation Funds (SMSF), the provisions of the SMSF trust deed are paramount.

It is important to note the following points in relation to BDBNs:

(a) the member must remember to review their BDBN regularly;

(b) the member must ensure that the strict form of the BDBN is followed, as set out in the trust deed, otherwise it will be invalid. This process can be very technical;

(c) there is a possibility that the member’s circumstances change and they die with an inappropriate BDBN in place;

(d) that the trustee will be bound to comply with a valid BDBN, whether it is still appropriate (including equitable and tax-effective) or not; and

(e) if the member loses capacity, their legal personal representative may be able to amend or revoke their nomination and this may vary from what the person has intended while they still had capacity.

In conclusion, chances are that your superannuation, which may be one of your biggest assets, will not automatically form part of your estate when you die. It is therefore imperative that your consult a lawyer when it comes to  your estate planning, to ensure that your Will and any BDBN are valid and deal with your assets the way you intended.

Please contact Amadeus Legal to discuss your particular estate planning needs.

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