Most people are aware that a Will is a vital tool in planning for what we want to have happen with our estate when we die. However many people don’t realise that superannuation doesn’t automatically form part of your estate and can’t automatically be included in your Will. For many of us, superannuation represents a significant portion of our wealth and we need to consider what is going to happen to it when we die.
Generally, trustees of superannuation funds are responsible for making the decision as to who your superannuation benefits get paid to if you die. Most of us nominate a preferred beneficiary when we set up our superannuation accounts but often forget to review this as time goes on. Some of us have no nomination at all. Many of us may not realise that there are only certain people who a death benefit can be paid to. In any event, it is the trustee that still makes the final decision unless you have a valid binding death benefit nomination in place when you die.
A binding death benefit nomination allows you to make the decision as to who your benefit will be paid to when you die, which removes the trustee’s discretion. Binding nominations let you nominate your dependents, such as a spouse and/or children, or your estate and are usually valid for 3 years, after which your nomination will need to be renewed. Your nominated beneficiaries must still be eligible to receive your nominated benefit at the date you pass away, otherwise your entire nomination will be invalid.
Having a valid binding death benefit nomination ensures certainty as to how your superannuation death benefits are to be paid. When there is no valid nomination, often executors and administrators are left with a difficult decision to make. This is because the person appointed as executor or administrator may also be eligible to, and want to, make a claim on your superannuation in their personal capacity, rather than on behalf of your estate for the benefit of the beneficiaries named in your Will.
Following recent court decisions both in Queensland and interstate, it is becoming vitally important to have valid binding death benefit nominations in place as part of your estate planning process so that you have certainty about who is going to receive your superannuation benefits. In the Queensland case of McIntosh v McIntosh [2014] QSC 99, the court found that part of the duty of the administrator of an estate to call in the assets of the estate was to make a claim for the superannuation benefits. The administrator in this case had made a claim for the superannuation benefits in her personal capacity, rather than on behalf of the estate for the beneficiaries, and it was held that she had breached her duty as an administrator to act in the best interests of the estate. She was required to account to the estate for the funds she received.
More recently in the South Australian case of Brine v Carter [2015] SASC 205, the court found that there is no distinction between an executor and an administrator and that the executor is in a fiduciary position where the executor must not, unless authorised by the Will-maker or consented to by the estate’s beneficiaries, pursue a personal benefit where it conflicts with the executor’s duty to collect the assets of the estate. A valid binding death benefit nomination may avoid this uncertain and, at times, costly outcome to ensure payment of your superannuation benefits to your intended beneficiaries without dispute.
Because superannuation is becoming such a significant asset (particularly taking into account the insurances that are often attached to superannuation policies) and consequently its distribution is becoming more and more litigated, it is perhaps now more important than ever before to ensure that your estate planning objectives consider your superannuation and ensuring that a valid binding death benefit nomination is in place to help avoid lengthy and costly litigation after you pass away.
We can assist you in advising on and preparing a valid binding death benefit nomination so that you have certainty about who is going to receive your superannuation benefits. Contact us today at our Ipswich or Springfield offices or call our office on 1300 285 888 to make an appointment.
