New year resolutions are often difficult to maintain and according to research are unachievable because the goal is too vague or having unrealistic expectations.
Perhaps this year an achievable resolution might simply be to review your death benefit nomination with your industry superfund or your self-managed super fund.
THE LAW
Under the Superannuation Industry (Supervision) Act 1993 (Cth) (Superannuation Act), a member can direct the trustee of its superannuation fund as to who shall receive the benefits payable on the member’s death.
TYPES OF NOTICE
There are three types of notices that a member can give the trustee:
- Option 1 – No notice
- Option 2 – Non-binding notice
- Option 3 – Binding notice
REQUIREMENTS FOR A VALID BINDING NOTICE
- Persons nominated must be “dependant” or legal personal representative
The persons you nominate in your binding death benefit notice must be either your “dependants” or your legal personal representatives.
“Dependant” is defined under the Superannuation Act as including a spouse, any child of the member (regardless of age), and any person who is financially dependant on you.
If a person you nominate is not a dependant, the trustee cannot pay the benefit to that person.
If you are in any doubt as to whether the people you nominate are “dependants” under the Superannuation Act you should seek professional advice.
- The benefit must be ascertainable
The proportion of the benefit to be paid to each dependant must be certain or readily ascertainable from the notice.
For example, if your benefit is to be paid to your spouse and your two children then the percentage each person is to be obtain must be specified (e.g. 50% to spouse, 25% to first child and 25% to second child).
- Form of notice
A binding notice must:
- be in writing;
- be signed by you in the presence of two witnesses who are at least 18 years old and not mentioned in the notice; and
- contain a declaration signed and dated by each witness, stating that the witness was present when the notice was signed.
Any notice you give confirming, amending or revoking an earlier notice must also comply with these requirements.
WHEN IS THE NOTICE NO LONGER BINDING
Your notice continues to have effect until the earlier of:
- the date set out in the notice
- if the Fund has five or more members, a date three years from the day after it was first signed, last confirmed or amended by you – this situation would normally apply if your superannuation is held with an industry fund; or
- if the Fund has less than five members, when you expressly revoke it in writing – this situation would normally apply if your superannuation is held with a self-managed superfund.
ADVANTAGES FOR BINDING NOTICES
There are a number of advantages to using binding notices, including
- binding notices have the potential to allow members to protect their death benefits from disputes.
- binding notices can be used as part of a member’s overall estate plan, including, for example, as part of a tax planning strategy for infant children or an asset protection strategy for adult children.
If you would like to achieve at least one of your resolutions for this year by making a death benefit notice or reviewing your death benefit notice please contact our office.
