Superannuation & the role it can play in your Estate

For many Australians superannuation is one of the biggest, if not the biggest, asset they have so it is natural to want this asset to be passed on to loved ones after we die. Unlike other assets, however, superannuation cannot always be passed on the same way a house or other tangible asset can.

Here’s why, and what you can do to help your superannuation end up in the right hands after you pass away.

Why doesn’t my superannuation form part of my estate?

Superannuation is never held by an individual. It is actually held in trust by a superannuation fund. Therefore, it does not form part of the individual’s estate.

In addition, superannuation funds are not required to distribute any benefit in line with the wishes set out in a will and although the terms of the will may be considered when assessing how the superannuation will be distributed, a will does not automatically influence the final decision made by the trustee.

How can I ensure my superannuation goes to my family?

Ultimately the decision to distribute the superannuation will be made by the trustee, however, the trustee can be guided by the implementation of either a binding or non-binding nomination.

A binding nomination involves nominating either one or multiple eligible beneficiaries to receive your remaining superannuation upon your death. The trustees of the superannuation fund are required to follow this nomination so long as nominees are able to receive the payment. In some instances, people may be prohibited from receiving the benefit either by law or due to the rules of the fund.

Binding nominations are typically valid for three years from the date they are signed, so it is important to have the most up-to-date version lodged with your superannuation fund.

A non-binding nomination provides the superannuation fund with the opportunity to consider the wishes of the deceased and to distribute the benefit in the most appropriate way.

What happens if a nomination does not exist?

If no nomination has been made by the deceased the superannuation fund will distribute the benefit in line with the rules of the fund and the relevant legislation.

In most cases the benefit will be distributed to:

• the deceased’s spouse;
• a dependent of the deceased;
• the deceased’s estate, or
• a mixture of any or all of the above.

Can my family challenge the decision of the super fund trustee?

Beneficiaries of estates are often displeased with the decisions made by superannuation trustees, despite trustees being bound to act in good faith and in accordance with the relevant rules and legislation.

Where no binding nomination exists and the trustee has exercised its discretion as to who the superannuation benefits are to be paid to, in cases where a family member or other beneficiary is unhappy with the decision, they have the right to challenge it, particularly in unusual circumstances where the benefit may have been awarded to a person who appears to be an outlier to the estate.

Examples of these types of situations include cases:

• where the benefit was distributed to an estranged spouse from whom the deceased had not yet divorced, and where a new de facto partner existed at the time of their passing;
• where dependents may be seeking a higher proportion due to their health or financial situation;
• where children may dispute the proportion distributed to them;
• where the legitimacy of the binding or non-binding nomination is questioned;
• where blended families are involved; and
• where no will was left by the deceased and the entire estate is in contention.

An individual must act within 28 days of being notified of the trustee’s original decision if they wish to seek an internal review of the superannuation fund.

What happens if the trustee refuses to change their decision?

The Australian Financial Complaints Authority (AFCA) is the organisation to approach with complaints about the superannuation trustee’s decision. The service is free and independent and will take both parties through a dispute resolution process, in line with the laws relating to superannuation. You should act within 28 days of receiving the trustee’s response and while a lawyer is not required when dealing with AFCA, during stressful times it can often be simpler to let an expert handle the case.

Should you be unhappy with the resolution reached by the AFCA the next step would be to make an appeal in the Supreme Court of Queensland.

If you are thinking about estate planning and need guidance on how to ensure your superannuation benefits your loved ones when you pass, or your spouse or a family member has died without a nomination in place our Wills and Estates team can help on (07) 4052 0700.