For many people, superannuation and any associated death benefit will be the most significant financial resource that they have.
A public superannuation fund is usually administered by a large national financial/trustee institution. Alternatively, superannuation interests may be held through a self managed superannuation fund ("SMSF"). These funds are growing more and more popular, particularly with small to medium business proprietors.
For Wills and estate purposes, your interest in a superannuation fund before you retire is not an asset directly under your control.
Payment of Superannuation benefits on your death
As a member of a superannuation fund, there is a number of options open to you to deal with your interest in the fund as at the date of your death.
Non-Binding Death Benefit Nomination
This is a guideline only for the trustee in terms of who to pay a death benefit to. The trustee isn't obligated to follow your instruction. This may allow some flexibility however unintended distributions may occur.
Binding Death Benefit Nomination
Where valid, this results in the trustee being obligated to follow the instructions in the nomination. It states who benefits are to be paid to and in what proportion. It provides certainty and peace of mind that your benefits will be paid as you intend.
The nomination needs to be in writing with all the beneficiaries nominated being dependants of you just before your death or you may nominate your legal personal representative (executor of your Will).
These nominations can be used to defeat family inheritance claims by ensuring the death benefit bypasses your estate.
All Super Funds will have their own documentation/forms to make a binding nomination and as such, this is not outlined within your Will but is a large part of appropriate and careful estate planning. It is useful to also advise your executors if you have made a binding nomination with a Super Fund.
Some industry funds do not offer this option to members. A recently established SMSF will offer a binding death nomination, although older ones may not. However an amendment to the deed can be effected allowing this to occur.
This is where pension payments continue to your dependent beneficiaries; weekly or fortnightly regular payments. By putting this in place, upon death the income payments will continue to be made to your beneficiary. The only people who can be named as reversionary beneficiaries are a spouse or former spouse, a child aged less than 18 years or any person where an interdependency relationship (defined by law) existed just prior to death.
The most appropriate means to instruct the trustee of the fund will depend upon your particular situation. Individual circumstances must be considered. It is difficult to predict all circumstances that will apply at death and appropriate legal advice from a solicitor highly experienced in Wills and Estate Planning should be considered at an early stage.