When taking instructions to prepare Wills, clients are usually surprised to learn that as a general proposition it is not possible to give Superannuation Benefits away through your Will. Who receives the entitlements that you have to superannuation in the event of your death is determined by the terms of the Superannuation Fund Trust Deed. That is the case regardless of whether your Superannuation is held in a Regulated Fund or in a Self-Managed Superannuation Fund (“SMSF”).
Most Superannuation Fund Trust Deeds provide a process enabling the Trustee to determine how the benefits are paid in the event that a Member dies. Often the benefit payable may include a Life Insurance component held by the Superannuation Fund.
Most Superannuation Fund Trust Deeds provide the Trustee with a broad and absolute discretion to determine how the benefits are paid between various eligible dependants. Usually the Superannuation Fund Trust Deed allows for the Member to lodge a Beneficiary Nomination Form. Nominations can be either Binding or Non-Binding.
If the nomination is Non-Binding, then whilst the Trustee must take it into account, it does not take away the Trustee’s discretion. On the other hand if the Trust Deed permits a Binding Nomination and a binding nomination is submitted then the Trustee will be obliged to distribute the benefit in accordance with the Binding Nomination in the event of a Member’s death.
If dependants do not like the Trustee’s decision about how the benefits are to be distributed, an application can be made to the Superannuation Complaints Tribunal (“SCT”) challenging the decision. A Trustee’s decision is not easy to overturn, and in the case of a SMSF there is no right to even appeal to the SCT. In a SMSF there are very limited grounds to challenge an exercise of the Trustee’s discretion.
Any attempt to challenge will face considerable obstacles and involve significant cost.
If you want to have control over where your superannuation benefit goes in the event of your death then you should enquire of the Fund whether it is possible to lodge a Binding Nomination and take steps to make sure that a Binding Nomination is in place, and up to date, as they often expire after 3 years.
If you have a SMSF it would be advisable to have the Trust Deed reviewed as some SMSF Trust Deeds do not provide for Binding Nominations (particularly older Deeds) and an amendment to the Trust Deed might be required in order to allow control over distribution of benefit in the event of death.
If a nomination is in place it is also important to review it periodically (every 5 years or so) to make sure the nomination is still in accord with your current intention.
We are able to assist in all aspects of Estate Planning, including Superannuation, and also in relation to review of Superannuation Fund Trust Deeds.