What happens to superannuation after death?

Most of us these days have some superannuation benefit held in a superannuation fund. For some of us superannuation may even be the largest asset we have. As such, it is only natural that upon death you would want to make sure that your superannuation benefit is distributed in accordance with your wishes. So, how do you leave your superannuation to a beneficiary?

Can I include my super in my Will?

Having a Will is important. There are many documented cases on just how things can go wrong if one dies intestate (that is without a will). This in itself warrants a separate blog post on its own.

But for the purpose of this article you need to be aware that superannuation cannot simply be distributed by the executors or trustees of a Will along with the rest of the assets that comprise the estate. This is simply due to the fact that your superannuation benefit is not technically owned by you but rather is held in trust by the Trustee of your Superannuation Fund to be distributed in accordance with your superannuation trust deed and superannuation laws and regulations.

How can I leave my superannuation to my beneficiaries?

To make sure that upon your death your wishes are followed, you need to make a valid Binding Death Benefit Nomination (“Binding Nomination”) with your Superannuation Fund. This will allow the Trustee of your Superannuation Fund to pay your superannuation benefit (i.e superannuation death benefit) to your nominated beneficiary, that is the person you have named in your Binding Nomination.

Keep in mind that for it to be valid, a Binding Nomination must follow certain criteria including:

  1. The nominee must be deemed a “dependant” for the purposes of the superannuation trust deed, superannuation laws and regulations; and

  2. The Binding Nomination must be signed by an independent witness with some superannuation funds requiring signatures of two independent witnesses.

When can I make a Binding Nomination?

A Binding Nomination can generally be made at any time with your Superannuation Fund. Keep in mind that each Superannuation Fund has its own requirements about executing a Binding Nomination and that if your superannuation is spread out across several funds you have to contact each fund to make a Binding Nomination with it.

Once you make your Binding Nomination it usually remains valid for three years from the date you signed it, confirmed it or amended it. This is why it is important that you make a note in your diary when the three years of your Binding Nomination are set to expire, and make sure that you update it. You should also update your Binding Nomination when your circumstances change.

It is also very important to remember that for a Binding Nomination to take effect it first must be received and accepted by the Trustee of your Super Fund.

Can Binding Nominations go “wrong”?

The short answer is yes.

Firstly, as noted above Binding Nominations can expire after three years and therefore can lapse. Secondly, they are not mandatory.

Problems can also arise when a Superannuation Fund deems a valid Binding Nomination as non-binding after which the payment of a death benefit will be entirely in the Trustee’s discretion.

The biggest problems however tend to arise when a Will makes provisions for the distribution of a superannuation benefit.

Wills Vs Binding Nominations

As we noted above, your superannuation benefit cannot be distributed through your Will because your superannuation benefit does not form part of your estate.

A good example of this is the Superannuation Complaints Tribunal (SCT) decision D13-14\056 [2013] SCTA 137. This was a case where the deceased had a superannuation benefit of $166,048.95 but did not have a Binding Nomination. The lack of a Binding Nomination caused the Trustee to exercise their discretion and awarded the superannuation death benefit to the de-facto partner of the deceased deeming her a “dependant”.

The adult son of the deceased referred the matter to the SCT arguing that he too is to be deemed a “dependant” and further argued that the deceased had a valid Will which bequeathed to the son “any car or cars, tools, superannuation and bank accounts”. The son also argued that the Will can be considered a valid Binding Nomination as it was made within the three year of the passing of the deceased and was signed by two witnesses.

The SCT did not consider whether the Will was a valid Binding Nomination but simply relied on that the deceased did not have a Binding Nomination when he was alive nor did he provide the Trustee with a Binding Nomination prior to his death. Based on this the SCT then determined that the direction in the Will did not bind the Trustee.

That Wills and superannuation don’t mix also shows the decision made by the Supreme Court of Western Australia in Ioppolo & Hesford v Conti [2013] WASC 389 that was upheld on appeal.

In this case the deceased and her husband had a self-managed superannuation fund (SMSF) with the husband nominated as a Trustee. At the time of death the deceased had a superannuation benefit of $648,586 that she bequeathed to her four daughters with a provision specifically excluding the husband. The deceased however also had a Binding Nomination in which she named her husband as the beneficiary although at the time of death the Binding Nomination was already lapsed. In exercising his discretion as a Trustee, the husband disregarded his wife’s Will, deemed himself as a dependant and paid himself his wife’s superannuation death benefit.

The executors of the deceased brought an application before the Supreme Court of Western Australia arguing that the Trustee (i.e. the husband of the deceased) did not exercise his discretion in a bona fide manner by ignoring the direction of the Will. The Court however dismissed the executors’ application noting that the direction in the Will was not binding on the husband in his capacity as a Trustee and that he was within his right to pay the superannuation death benefit to himself. Further, the Court found no evidence that the husband in his capacity as a Trustee did not exercise his discretion in a bona fide manner.

Concluding Thoughts

You need to remember that your Superannuation does not form part of your estate and is dealt with separately. While it is important to contact your Superannuation Fund about making a Binding Nomination, the safest way is to contact an experienced solicitor who can make sure that all of your assets including your superannuation are distributed in accordance with your wishes when the inevitable happens.

Here at Ann Legal, our lawyers have years of experience working with Wills and Estates and can provide you with comprehensive legal advice tailored to your circumstances for your peace of mind. We have served many satisfied clients from across Newcastle, the Hunter and the Central Coast. Call us today on (02) 8005 8025.

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