Protecting your Superannuation Benefits for Future Generations

Contents

• Superannuation & Your Will
• Reversionary Pensions Nominations
• Binding Death Benefit Nominations
• Summary

Superannuation & Your Will

One common misconception is that superannuation automatically forms part of the estate of a deceased member and is dealt with in accordance with a Will. This is actually not the case and the treatment of superannuation is determined by a number of different factors including the super fund trust deed, any binding death benefit nominations that have been made and any reversionary pension nominations that have been made.

So I take you through some important areas to consider when planning for the future and knowing where your superannuation will go.

Reversionary Pensions Nominations

One useful tool in protecting superannuation benefits upon the death of a member is a reversionary pension account. If a member has nominated their pension account to be a reversionary pension then the balance of the account can be transferred to another member of the fund e.g. a spouse.

This can be particularly tax effective as it allows you to keep the funds within the superannuation system. It is important to keep in mind the members transfer balance cap as the recipient may need to roll their existing pension account back into accumulation.

Binding Death Benefit Nominations

A Binding Death Benefit Nomination (BDBN) is another tool that can provide greater certainty and protection upon the death of a member. BDBN is a written direction from a member to the trustee of a superannuation fund requiring death benefits to be paid to their nominated dependent(s) and or legal personal representative.

Below are a number of key questions that should be considered when formulating a BDBN:

• Do your superannuation fund’s governing rules permit BDBNs to be made?
• Has the BDBN been made in the appropriate form?
• Are the nominated beneficiaries within the BDBN permitted under superannuation law (dependants and/or legal personal representative)?
• Will the BDBN lapse or become non-binding after a particular timeframe?
• Does the BDBN align with and complement other estate planning documentation (i.e. Will, reversionary pensions)?
• What form can the death benefits be paid (lump sum vs pension)?
• What are the taxation implications to the nominated beneficiaries, which may be impacted by:

- Tax status of the nominated beneficiaries (dependant vs non-dependant)
- Tax components of superannuation death benefits (taxable vs tax-free)
- Form of the superannuation death benefits (lump sum vs pension)
- Insurance proceeds

• Has the BDBN been received and accepted by the trustee of your superannuation fund?
• Have you sourced specialist legal advice in relation to your overall estate plan (highly recommended)?

Summary

It is important to ensure that estate plans are reviewed and updated on a regular basis (at least every three years), especially if your circumstances have changed recently. Integrating reversionary Pensions or Binding Death Benefit Nominations as part of your estate plan will provide more comfort and certainty that your superannuation benefits will be dealt with in accordance with your wishes.

As with all legally binding documents it’s important to seek professional advice to ensure that your plans are legally effective and tax efficient. Make sure you speak to our experienced team at BLG Business Advisers to support your estate and superannuation plans. Our team are Wollongong Accountants who service all across Australia and are here to help you so please talk with us today.

*Please note that the above information is general advice only. We recommend you seek advice from a specialist relevant to your personal situation. This information is correct at the time of publishing and is subject to change*