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Want total control of your legacy? Extra steps are required to secure your super. Photo: PeopleImages.<\/p>\n
Many people think their will is the final word on their legacy, but in reality, your largest or second-largest asset \u2013 your superannuation \u2013 exists in a parallel legal universe where your will has zero authority, unless you build a bridge between them.<\/p>\n
DDCS Lawyers special counsel Daniel Ravenscroft Paterson, an expert on wills, estates and business succession, says it\u2019s an easy mistake to make.<\/p>\n
\u201cA lot of people think of super as an asset in the same vein as another bank account, something that\u2019s automatically treated as a personal asset,\u201d he says.<\/p>\n
By default, your super balance sits in a separate legal framework managed by the fund\u2019s trustee and governed by two things \u2013 superannuation law (the SIS Act) and the fund\u2019s rules.<\/p>\n
When you die, assets in your estate held solely in your name pass in accordance with your wishes under your will. On the other hand, your superannuation death benefit distribution will need to comply with the SIS Act and your fund\u2019s rules.<\/p>\n
Here, beneficiaries are limited to eligible dependents only, such as a spouse or child, or your legal personal representative. You will normally be asked to nominate who receives your death benefits from this list and these death benefit nomination forms can work as the will for your super fund.<\/p>\n
If you do not leave a valid nomination, your superfund\u2019s trustee may have the discretion to make the final call on which eligible dependents get your benefits.<\/p>\n
But if you\u2019re thinking, \u201cit\u2019s my money, why should a trustee decide who gets it?\u201d, there are steps you can take to assume control.<\/p>\n
The first thing to know is that a simple direction in your will won\u2019t suffice.<\/p>\n
\u201cSome people fall into that mistake and they think they can put a direction in their will that says \u2018I want my superannuation death benefits to go to this person\u2019,\u201d Daniel says. \u201cBut the only thing that overrides the trustee\u2019s discretion is a complying death benefit nomination.\u201d<\/p>\n
A binding nomination with your super provider effectively passes your death benefit to your estate, to be distributed in accordance with your will.<\/p>\n
\u201cThat\u2019s especially important if you have more complex plans for your super, for instance, you want grandchildren included as beneficiaries and not just children,\u201d Daniel says.<\/p>\n
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DDCS wills, estates and business succession expert Daniel Ravenscroft Paterson says many people don\u2019t realise their superannuation isn\u2019t handled as part of their estate. Photo: DDCS.<\/p>\n
It\u2019s important to note the important difference between a binding nomination and a non-binding one \u2013 it\u2019s all in the name. A trustee must follow the instructions laid out in a binding nomination, while a non-binding nomination is more like \u201can expression of a wish\u201d.<\/p>\n
\u201cIt is persuasive and a trustee will follow it as a guide, but they\u2019ll make the final decision themselves,\u201d Daniel says. \u201cThere is some risk that a decision could be made contrary to your wishes.\u201d<\/p>\n
It\u2019s equally important to note that a binding nomination is not always set-and-forget; some funds only allow lapsing nominations that must be renewed, usually every three years.<\/p>\n
\u201cOften you\u2019ll get a superannuation provider providing a reminder, but if you miss that reminder, don\u2019t assume they\u2019ll chase you up,\u201d Daniel warns.<\/p>\n
The three-year sunset clause on binding nominations creates a precarious window. If you lose decision-making capacity and your nomination lapses, you can no longer legally renew it yourself.<\/p>\n
The solution lies in a robust Enduring Power of Attorney.<\/p>\n
\u201cYou want to make sure that you\u2019ve appointed someone you trust to act on your behalf on financial and property matters,\u201d he says. \u201cYou need to check specifically to see if the fund rules allow an attorney to renew a lapsing nomination on your behalf.\u201d<\/p>\n
For those seeking maximum control, a Self-Managed Super Fund (SMSF) offers a level of flexibility that large industry or retail funds cannot match, as it effectively allows you to be the trustee.<\/p>\n
\u201cYou can update the rules of your fund to let you make binding or non-binding nominations as needed,\u201d he says. \u201cThere is more flexibility involved, but also more responsibility to stay on top of everything.\u201d<\/p>\n
Ultimately, your superannuation death benefit requires maintenance, whether it\u2019s creating and renewing a binding nomination, appointing a Power of Attorney or moving to a more flexible fund structure.<\/p>\n
For more information, visit DDCS<\/a>.<\/p>\n