15 Aug Will Your Super End Up In The Right Hands?
Will Your Super End Up In The Right Hands?
Next time you are reviewing your superannuation strategy, be sure to include a review of your nominated beneficiaries.
When youâ€™ve spent decades building assets for you and your family to enjoy, you want to know those assets will end up in the right hands after you die. Thatâ€™s one of the reasons people put a Will in place.
But one of the aspects of estate planning thatâ€™s often overlooked is superannuation. And given the growing importance of superannuation as an investment vehicle, itâ€™s worth making sure you know exactly where you stand if something unexpected happens to you.
Have you made a binding nomination?
When you open up a superannuation account, you are required to nominate who you would like to receive your benefits if you die. These nominations can be either
â€˜bindingâ€™ or â€˜non-bindingâ€™.
If you make a non-binding nomination, the trustee will take this into consideration when they distribute your benefit, but there is room for the trustee to use their discretion. This means your benefit may be distributed in a way thatâ€™s different to your intentions. And if you belong to a public super fund, your benefit may be subject to claims through the Superannuation Complaints Tribunal (not applicable to SMSFs).
Making a â€˜binding nominationâ€™ gives you greater certainty over where your benefit goes, as the trustee must abide by a binding nomination. However, what many people donâ€™t realise is that binding nominations only last three years. After that, any benefits will be paid to your estate.
Because of this, binding nominations should be reviewed every three years to provide greater certainty over where your superannuation death benefit will go. You may also want to review your binding nomination sooner if you separate or divorce from your partner, as a binding nomination overrides anything you might have changed in your Will.
Who are your beneficiaries?
An important consideration when choosing the beneficiary for your binding nomination is the tax treatment of benefits paid from super.
From a tax perspective, the â€˜idealâ€™ beneficiaries of a superannuation benefit are your spouse and/or dependent children under 18, as they can generally receive your death benefit tax-free. If you nominate adult children, or friends or siblings, they may be forced to pay tax on the benefit of up to 31.5%.
This is something you may wish to take into consideration when you are dividing up your assets in your Will. For example, if youâ€™re looking to divide your assets between your spouse and adult children, you may wish to leave your entire superannuation death benefit to your spouse and other assets (e.g. property, cash or investments) to your adult children. That way you may be able to avoid your estate being diluted by tax.
To make sure your assets will be passed on in the way you intended, you should review your entire estate planning and superannuation strategy with a solicitor and financial adviser.