Knowledge

13 February 2018

What happens to my super when I die?

As a wills and estates solicitor I often hear the statement “I don’t have any assets, so I don’t need a will”.

This couldn’t be further from the truth.  I often respond with the following questions.

Me: “Do you work?”

Friend: “Yes

Me: “Do you have super?”

Friend: “Yes

Me: “That’s an asset right there.

In fact, superannuation is often a person’s largest asset.

In the estate planning world, superannuation is an unusual type of asset.  This is because superannuation is not typically an asset of your estate which is covered by the provisions of your will.  Your will only covers assets owned by you personally.  On the other hand, your super is held for you on trust by the trustee of your superannuation fund.

In order to direct who gets your super in the event that you were to pass away, you need to complete a binding death benefit nomination form (“BDBN”) with your respective superannuation fund or if you have a self managed superannuation fund, in accordance with the terms of the trust deed.

I bet you’re still thinking, well in that case I don’t need a will.

What I often find in practice is that a lot of people do not fully understand who you can actually nominate on those binding death benefit forms for your nomination to be binding.

Under the superannuation law, the eligible beneficiaries (whom you can nominate on your BDBN form) include:

1. your dependants; or
2. your legal personal representative (i.e. executor of your will or administrator of your estate).

“Dependants” include:
1. your spouse (married, de facto or same sex partner);
2. your children (including step-children and adopted children);
3. anyone who is financially dependent on you when you die; and/or
4. anyone who is in an interdependency relationship with you when you die.

As part of my estate planning practice, I always ask this question “Do you have a binding death benefit nomination in place?” and 95% of younger people or people without dependants respond with:

Yes, I have nominated my sister and my brother

Or

No, what is that?”.

If your nomination is invalid (i.e. if you have nominated someone who does not fit within the criteria of eligible beneficiaries above) or you do not having a binding death benefit nomination in place, the trustee of your superannuation fund has discretion as to who they pay your superannuation death benefit to in the event of your demise.

If you don’t have any dependants, then in majority of cases the superannuation fund will pay your superannuation death benefit to your estate, to be distributed in accordance with the terms of your will.

What if I don’t have a will?

If your superannuation is paid into your estate and you don’t have a will, it will be distributed in accordance with the rules of intestacy, which are a legislative set of rules. The rules of intestacy do not take into account your circumstances at the time of your passing and therefore, the distribution of your estate under these rules, may not be in accordance with your wishes.

Let’s use the example of Ben’s estate.

• Ben was 30 years of age when he passed away suddenly.
• He did not have a spouse (married or de facto) and had no children.
• Ben’s main asset was his superannuation (including a life insurance component), worth approximately $400,000.00. Ben had completed a binding death benefit nomination, and had nominated his two siblings Jack and Jill (50% each).
• Ben did not have a will.
• Ben was close with his mother, Jane, however he was estranged from his father, Peter.
• Jane attempted to administer Ben’s estate as his next of kin. She contacted his superannuation fund to have the funds paid to Jack and Jill, however the superfund asked for a grant of letters of administration* before they could release the funds.
• Jane obtained the grant and the superannuation fund advised her that because Ben’s nomination was invalid, they would be making a distribution to Ben’s estate.
• As mentioned earlier, Ben died intestate (that is without a will), so that meant that the rules of intestacy apply.
• Under the rules of intestacy, as Ben was not survived by any dependants, his estate was distributed to his parents equally.
• This was clearly not in accordance with Ben’s wishes and there was very little his siblings (and his mother) could do.

If Ben had simply prepared a will, gifting his estate to Jack and Jill equally, then this situation could have been avoided.

If you would like assistance preparing a binding and effective estate plan, please do not hesitate to contact me.

*A grant of letters of administration is an official document issued by the Supreme Court of Queensland which declares the name of the person(s) who has the formal authority to handle the financial matters of a deceased person.

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