Superannuation and the associated life insurance are often our biggest asset upon death. But do you know what happens to your super when you die?
Your superannuation (and any death benefit) don’t automatically form part of your estate. This means that even when you have a valid will the asset will be dispersed as per the super fund's internal policy. This may not be the result you want and can have repercussions for your loved ones. For example, one possible outcome is that the superannuation can be split between a spouse and children (to be held on trust until they reach a certain age). This can leave the spouse unable to meet the family's outgoings, especially when they have lost the deceased’s income and commitments to the children make it difficult for them to work full time.
There are also tax implications around distributing superannuation to dependents (spouse and children under 18) vs non-dependents (like adult children and other family members). Superannuation distributions to non-dependents will be subject to tax. In other words, the identity of your nominated superannuation beneficiaries is significant on a number of levels.
That said, there are opportunities around your superannuation too. In blended families, an appropriate nomination to a dependent (like your spouse) can form part of an overall estate plan that might leave other assets to children via a Will. The nomination with respect to superannuation can keep this asset out of your estate and will therefore be excluded from a claim under the Family Provision Act.
So, what should you do?
Be familiar with your superannuation and its associated benefits, such as life insurance. Next, make sure you have a Will that outlines your wishes and considers the needs and interests of your family members. At the same time, after considering an appropriate recipient for your superannuation and your estate plan as a whole, complete and lodge a binding superannuation nomination.
If you’d like any further information or assistance in drafting your Will and taking the required steps to ensure your superannuation is properly included in your estate plan, contact Meiklejohn Legal on 0474 112 316 to discuss.
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