Money talks: Julia Newbould
What you need to know to leave your super to loved ones in the event of your death
As we were putting this issue together, the case of the young court clerk who died after being hit by a car was a topic of discussion. Her boyfriend at the time, a retired magistrate, was awarded her death benefit after being named as her superannuation beneficiary by her super fund trustee.
According to reports, the young woman had nominated her mother as the beneficiary of her superannuation and life insurance. However, her partner made a successful claim to the trustees that he was her de facto partner and, therefore, her dependent.
What this highlights is the issues that can arise around who nominating a beneficiary for your super fund.
And typically, this issue mostly affects younger people who are more likely to nominate close family members if they are not yet in a longterm relationship. Unfortunately, when they pass away, their choice won’t necessarily be honoured by the fund trustee.
The safest option is often to nominate for funds to be paid to their estate. To clarify their wishes, their will should be amended to include this nomination.
If you think you don’t have enough in superannuation to worry about who to nominate as your beneficiary, think again. Your super may also include insurances, which could be considerable.
According to Peter Bobbin, principal lawyer at Coleman Greig Lawyers, everyone should make a will, and everyone should nominate a beneficiary for their super and do whatever they need to do to make sure their super is dealt with in the way they want it to be dealt with.
On a recent visit to Crookwell, in regional NSW, Bobbin says he became aware of lawyers advertising ‘have you been left out of someone’s super’. It used to be ‘have you been left out of a will’, says Bobbin, but clearly this is an increasingly common area of litigation.
“This is one of the most continually litigated areas in super and succession at the moment – not just in super but in deceased estates,” he says. “Given that we’ve had compulsory super for more than 30 years it applies to the baby boomer generation and every generation that comes after it.
“Super is not part of your estate; and that is so vital for people to understand. It only becomes locked into the estate if people do something about it. That’s the blunt message people need to understand.”
There are three ways to organise your super, Bobbin says.
1 Organise a binding death benefit nomination that says “my super on my death goes to my estate”. This is the easiest to deal with because then the will controls it and there’s just one document that deals with your estate.
2 If you don’t want to do a binding death benefit nomination ‘to my estate’ you can make a binding death benefit, and name who gets what and how much. There are tax reasons why you might want to keep your super in that structure – for your partner or dependent. It might also speed up the process to give your beneficiary your super benefit without waiting for probate. Choosing beneficiaries for a binding death benefit nomination can be complex. It has to be a spouse, whether legal or de facto, a child or someone who is an interdependent dependent, for example, a parent you might be living with in a co-dependency. But if the parent is not a dependent, they cannot be nominated.
“This is part of the problem, because it’s so rarely understood that a dependent is not necessarily just a loved one. If you want to give super to anyone outside this narrow classification (above) then it has to be done through the will,” says Bobbin.
3 The bad choice is not making any decision at all, not giving any guidance and letting the trustee of your super fund make the decision on your behalf after you’re gone.
Bobbin says another recent case was about a couple in the Riverina district, where a son’s girlfriend claimed to be his de facto spouse. His parents also made a claim but because he’d made no nomination in super, the super fund ended up giving her all the money.
Not all death benefit cases make it through to the courts, Bobbin says, so you need to consider those that do only represent the tip of the iceberg.
“It’s important for everybody who has superannuation, even a young person who feels they don’t have much super (but will commonly have life insurance), that if they want their super to go to their sibling, parent or other direction, the best thing for them is a binding death benefit nomination that says ‘the money will go to my estate’ and then make a will to say exactly what they want.”