Superannuation, Binding Death Nominations and your Will

SUPERANNUATION, BINDING DEATH NOMINATIONS, AND YOUR WILL

 Q. I have $540,000 in superannuation entitlements. Last year I made a Will leaving my super to my brother, Eric. Eric has no assets. 15 years ago, Eric lent me money to start my business and, although I repaid him, his loan was the catalyst for me being able to start my business, which was successful. I have a wife and 2 adult children and under my Will they will receive my house and assets worth over $3 million. Is there any problem with leaving Eric my super?

A. Yes, there is a problem. The provision in your Will for Eric to have your superannuation entitlements has no effect. It is, however, evidence of your intention to benefit Eric.

Superannuation is not like other assets as your superannuation benefit is held by the trustee of your superannuation fund. Superannuation cannot be dealt with by your Will.

The trustee will distribute your superannuation benefits in accordance with your binding benefit nomination (BDN) or, if no valid binding death nomination, the provisions under the Superannuation Industry (Supervision) Act 1993 (SIS Act)

Q. So can I make a BDN in favour of Eric?

A. A BDN in favour of Eric will not be effective. The trustee only has to follow your binding death nomination (BDN) if the BDN is valid. Even if the BDN is executed and witnessed in the manner required by the superannuation trust deed or the regulations under SIS Act and has not expired (usually 3 years after executed unless the trust deed provides for non-lapsing nominations), as Eric is not a dependent or inter-dependent as defined under the SIS Act, it is not valid.

Q. Then how can I leave my super entitlements to Eric?

A. (i) Execute a BDN nominating that your superannuation entitlement is to be distributed by the trustees to your legal personal representatives (they are your executors under your Will). Your superannuation entitlement will become part of your estate and the distribution will be in accordance with your Will AND (ii) Make a new Will providing that your executors distribute the amount received from your superannuation fund to Eric.

Q. Anything else?

A. Yes, make sure the BDN is executed and witnessed in accordance with your super fund’s requirements and renewed if it expires in 3 years.

Q. If I forget to renew the BDN, does Eric get my super?

A.Possibly not. If the BDN is not renewed and is invalid at the time of your death, the trustee of your super fund has a discretion on whether your superannuation entitlement is distributed to your legal personal representative of your estate or to your dependants (your wife and children) in the amounts the trustee determines. Your previous BDN nominating your legal personal representative and your Will providing your legal representatives distribute the amount received from your super fund to Eric would be evidence of your wishes and would be taken into account.

Eric could lodge a complaint to the Australian Financial Complaints Authority disputing the trustee’s decision if the trustees decide to provide your super to your wife and/or children rather than your legal personal representatives.

Q. So if I renew and have a valid BDN at my death and a valid Will, does Eric get my super?

A. Yes, subject to your wife and/or adult children making a family provision claim for all or part of the amount from your super.

For advice on superannuation and your Will and other issues, please contact Kathy Chase at: pittwaterfamilylawyers@gmail.com or telephone her on: (02) 9918 6565 or 0418 285 307.