Does Superannuation Automatically Form Part of My Estate? What You Need to Know

By Jaye Mankelow
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Many people assume that their superannuation automatically forms part of their estate upon death, but this isn’t necessarily the case. Superannuation is treated differently from other assets like property or savings. The distribution of your super depends on your fund’s rules and the death benefit nomination you’ve made (or haven’t made).

Understanding how superannuation fits into your estate planning is crucial to ensuring your wishes are carried out. Here’s a closer look at how superannuation death benefits work, key considerations, and why working with an estate planning solicitor is essential.

Does Super Automatically Form Part of My Estate?

No, superannuation benefits don’t automatically form part of your estate unless you explicitly direct them to do so through a valid Binding Death Benefit Nomination (BDBN). Without this, the trustee of your superannuation fund has discretion over who receives your super benefits, typically paying them to dependants or your estate.

Key Terms to Know

• Binding Death Benefit Nomination (BDBN): A legally binding document that directs your super fund trustee to distribute your death benefits to specific beneficiaries or your estate.
• Reversionary Pension: A pension that continues to be paid to a nominated beneficiary upon your death.
• Dependants: For superannuation purposes, dependants include your spouse, children, or any person in an interdependent relationship with you.

What Are My Options for Superannuation Death Benefits?

Binding Death Benefit Nomination (BDBN)

A BDBN gives you control over who receives your superannuation. You can nominate:

Key Consideration: Most BDBNs must be renewed every three years, so ensure yours is up to date.

• • A dependant, such as a spouse or child.
  • Your legal personal representative (LPR), ensuring the benefits flow into your estate and are distributed according to your will.

Reversionary Pension

If you’re receiving an income stream (pension) from your super, you may nominate a reversionary beneficiary to continue receiving the payments upon your death. This is a common option for spouses.

Discretionary Payment by Trustee

If no valid BDBN or reversionary nomination exists, the trustee of your super fund decides how to distribute your super, which could lead to outcomes contrary to your wishes.

Key Considerations for Estate Planning

Does Superannuation Fit Into Your Estate Plan? Superannuation is a significant asset for most people, so ensuring it aligns with your overall estate planning goals is vital. This includes deciding whether your super should be paid directly to dependants or flow through your estate.

Tax Implications

Superannuation death benefits may be taxed differently depending on the recipient. Benefits paid to dependants (as defined by tax law) are typically tax-free, while payments to non-dependants, such as adult children, may incur tax.

Complex Family Situations

In blended families or relationships with interdependence, careful planning is essential to avoid disputes and ensure benefits are distributed fairly.

Should You Engage an Estate Planning Solicitor?

Yes. Superannuation death benefits should form part of a broader estate plan that includes your will, enduring power of attorney, and asset protection strategies. An estate planning solicitor can:

• • Draft or review your will to ensure superannuation is handled as intended.
  • Help you establish or renew a BDBN.
  • Advise on tax-effective ways to structure your superannuation and death benefits.

Practical Steps to Take

1. Check Your Nominations: Review whether your super fund has a current, valid BDBN or reversionary nomination.
2. Engage Professionals: Work with an accountant, financial planner, and estate planning solicitor to align your superannuation with your broader estate plan.
3. Update Regularly: Revisit your estate plan and nominations whenever your circumstances change (e.g., marriage, divorce, new children).
4. Educate Your Family: Ensure your family understands your wishes and how your superannuation benefits will be distributed.

Superannuation is a powerful tool for building wealth, but its distribution after death requires careful planning. Without a clear strategy, your super benefits may not be distributed as you intend, potentially causing disputes or tax inefficiencies.

Incorporating superannuation into your estate plan with the help of an experienced solicitor ensures that your wishes are carried out while maximising benefits for your loved ones.

If you’re unsure where to start or need guidance on managing your superannuation and estate, we can help you navigate the complexities with confidence.

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