It is a common misunderstanding that when you die, your superannuation will automatically form part of your estate, to be distributed according to whatever you have set out in your Will.
Many people may not be aware that superannuation laws actually place restrictions on superannuation death benefits. It is important to note that the law actually states that a trustee of a superannuation fund can only pay a member’s death benefit to the following people:
1) One or more of the member’s dependants;
2) The member’s legal personal representative;
3) Some other person where, after making reasonable enquiries, the trustee has been unable to find either a legal personal representative or a dependant of the member.
Many superannuation funds do allow members to make superannuation death benefit nominations (subject to the restrictions above). However, if a person has not made a specific nomination; their superannuation death benefit may be paid based at the discretion of the super fund trustee, or in accordance with the specific rules of that particular superannuation fund.
Additionally, there are certain super funds which do not allow members to make death benefit nominations. Instead – who gets your superannuation death benefit may be based on the super fund’s trust deed and scheme rules. Certain superannuation funds may have a trust deed or set of rules that are even more restrictive than super laws.
This specific issue was recently highlighted when the Australian media reported on the case of Mr Leverton; an RAAF mechanic who tragically died leaving behind two young children . Mr Leverton was a member of Military Super; a fund run by the Australian government – and one that does not allow members the ability to nominate a superannuation death beneficiary.
Mr Leverton had nominated his former partner and mother of his children as the beneficiary of his estate in his Will. His former partner believed that the children’s future would be secured with Mr Leverton’s balance, as well as the insurance held in his Military Super. However, the trustee of his superannuation fund did not pay his superannuation death benefit according to his Will; instead paying only 11% of his superannuation death benefit to each child, with the remaining 78% going to his new partner.
The family insisted that this was never the deceased Mr Leverton’s intent and appealed to the trustee, which decided to uphold the decision. The trustee legally had to follow the scheme’s rules, with the determination being that the new partner’s relationship with Mr Leverton was as a legitimate couple.
The most important lesson to take away from this case is that it is exceedingly important to ask the question ‘who gets my super when I die’? You may find that the answer surprises you, and not in a good way.
Additionally, it is important to review how your life insurances are structured. If your life insurances are held through your superannuation, you need to know whether this will also go to your intended beneficiaries.
As this case demonstrated, it may not be given to the person you expected or intended it to go to.
It is important to check whether your superannuation fund allows a death benefit nomination. If it doesn’t, your estate plan may need to take this into account and make other arrangements. If your super fund does allow a nomination – it’s important to make sure that you make a valid nomination that will actually achieve your desired outcome.
There are different types of nominations, such as binding and non-binding nominations, which each have their own advantages and disadvantages.
As part of our all-encompassing financial planning service, Fortis Financial Planning considers each of these aspects and can actively work with your estate planning lawyer to ensure that your superannuation structure, life insurance arrangements and estate plans all align with your actual intentions.
