Superannuation – Is Your Will Enough?

Superannuation has become a major asset for an increasing number of Australians since the introduction of compulsory payments by employers since 1992 by the Australian Government.

Contrary to popular belief, superannuation is not an estate asset and it does not automatically form part of your estate upon your death. Rather, payment of superannuation upon death is a matter determined by the trustee of the superannuation fund in accordance with the governing rules of the respective fund and relevant law.

Should your fund allow them (there are a few commercial funds that don’t), a binding death benefit nomination (BDBN) is a way in which you can, during your lifetime, override the trustee’s discretion.

A BDBN is effectively a written notice given by a member to the trustee of their fund which directs the trustee to pay the member’s death benefit, often comprising both superannuation and associated death benefits such as life insurance, in accordance with their wishes outlined in the BDBN.

The trustee of the fund is required to follow the instructions outlined in the BDBN, provided that it has been correctly prepared and executed.  A valid BDBN remains in effect for three years from the date it is signed, last amended and confirmed. In some instances, a non-lapsing binding death benefit may also be available and appropriate.

For members that have not made a BDBN with their fund, the trustee of the fund has the authority and discretion to decide whether to pay any benefit payable on your death to one or more of your dependants, or to your estate.

Dependants in this context include a spouse, children of any age, any person financially dependent on the member, any person in an interdependency relationship with the member, and the member’s legal personal representative.

There are a number of advantages to making a BDBN. These include the peace of mind and certainty as to who will receive your death benefit once you die and the ease and speed at which a death benefit can be paid.

Unlike those assets that form part of your estate, a Grant of Probate or Grant of Letters of Administration is not required to be obtained in order for a beneficiary to access your superannuation death benefit. Similarly, a BDBN can protect your superannuation and associated death benefits from any claims made against your estate.

For further advice or guidance on superannuation and the implications for an estate, executor or beneficiary, please contact Alana Stallard on astallard@bbvlegal.com.au  or (08) 9325 9644.