When was the last time you looked at your superannuation statement and checked who would receive the funds if you were to pass away?
Planning so that the proceeds of your superannuation are distributed in accordance with your wishes is a relatively simple matter, yet it is often overlooked.
This is especially important if your circumstances have changed. That is, you may have married or divorced, added children to your family or your spouse or any of your dependants have passed away.
Importantly, superannuation differs from most other investments as it is not distributed via your Will, unless you make your estate the beneficiary.
Instead, you must nominate the beneficiary for your superannuation through your superannuation fund. There are a number of allowed beneficiaries which include your spouse, your Estate and other people who are considered financially dependent upon you.
Importantly your superannuation balance includes both your investment balance and any life insurance held within the super fund, so that if you have a low investment balance you may still have a large superannuation Death Benefit depending on the amount of insurance you hold within the fund.
You can make a nomination which indicates who you want to receive your superannuation death benefits. Even with such a nomination in place, the trustee of a super fund still has discretion to decide who will receive your superannuation benefit upon your death. Please note it is rare that this decision would be in conflict with the nominated beneficiary, but it is an important point to note. However, some super funds have an option to make a ‘binding nomination’.
A binding nomination removes the discretion otherwise available to the trustee, placing a legal requirement to pay superannuation benefits according to your directions.
Due to this power, it’s important to understand the implications of any binding nominations you make including giving serious consideration to the tax implications of payments from superannuation. There can be different tax liabilities depending on which beneficiary you choose, meaning that there are a variety of ways to manage the distribution of your assets, of which superannuation is only one. It’s important to discuss the implications and the likely impacts with your financial adviser.
To find out more and to discuss how I can assist you to work through your family succession matters in a logical manner and coordinate with others including your accountant and solicitor, towards creating outcomes that are specific family circumstances, please give me a call on 0438 946 638.
Phillip Dibben is a financial adviser at Active Financial Management. Active Financial Management and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306 trading as Fortnum Financial Advisers.
This information does not consider your personal circumstances (including taxation) and is of a general nature only. You should not act on the information provided without first obtaining advice specific to your circumstances.