For many Australians, superannuation is one of the largest assets they will ever accumulate. Add life insurance held through super and the amount payable on death can sometimes be substantial.
Yet there is one fact about superannuation that regularly surprises our estate planning clients:
Your superannuation does not automatically form part of your estate, and your Will does not automatically control who receives it.
That is why superannuation should be considered as part of your overall estate planning, rather than preparing a Will and assuming everything has been taken care of.
At Hemmings Legal, we help individuals and families understand how their Will and broader estate planning arrangements fit together. We are based in Bayswater North and assist clients throughout Melbourne’s eastern suburbs and across Victoria.
Does superannuation form part of my estate when I die?
Not necessarily.
Unlike money in a bank account held solely in your name, your superannuation is generally held by the trustee of your super fund.
When you die, your super fund pays a superannuation death benefit. Depending on your circumstances, the rules of your fund and any valid death benefit nomination, that money might be paid:
- directly to an eligible beneficiary; or
- to your legal personal representative, meaning your estate.
If your superannuation death benefit is paid to your estate, it can then be dealt with under the terms of your Will.
ASIC’s Moneysmart guidance on super and Wills similarly explains that a Will does not automatically cover superannuation.
So, does my Will control my superannuation?
Not automatically.
This is an important distinction.
You might have a carefully drafted Will setting out exactly how your estate should be divided between your spouse, children or other beneficiaries. But that does not necessarily mean your superannuation will be divided the same way.
For that reason, when we prepare an estate plan at Hemmings Legal, superannuation is part of the conversation.
A Will should not be looked at in isolation.
You can read more about what is involved in our estate planning process in Victoria.
What is a superannuation death benefit nomination?
Many super funds allow members to nominate who should receive their superannuation when they die.
Depending on the particular fund, nominations can include different arrangements, including binding and non-binding death benefit nominations.
Broadly, a valid binding nomination can require a trustee to pay the benefit according to the nomination, subject to superannuation law and the fund rules. A non-binding nomination generally informs the trustee of your wishes without necessarily requiring the trustee to follow them.
Different funds have different rules, forms and requirements. Some nominations may also expire.
Moneysmart’s explanation of who gets your super when you die provides further general information about binding and non-binding nominations.
Why superannuation nominations and Wills need to work together
This is where estate planning becomes important.
Imagine that your Will says that your estate is to be divided equally between your three children.
You might naturally assume that means your children will also receive your superannuation in those proportions.
That may not be the outcome.
Where your superannuation is paid directly by your super fund to a beneficiary, rather than into your estate, the provisions of your Will dealing with the distribution of your estate generally do not determine that payment.
Good estate planning therefore involves looking at the bigger picture:
- your Will;
- your superannuation;
- any death benefit nominations;
- life insurance;
- jointly owned assets;
- trusts and companies, where relevant; and
- your family circumstances.
The aim is to identify how the different pieces fit together.
Don’t forget life insurance inside your super
Another easily overlooked issue is life insurance held through superannuation.
Your super balance might say $200,000, for example, but there may be an additional death benefit provided by insurance held through the fund.
The ultimate amount payable on death could therefore be considerably different from the account balance you have in mind.
Moneysmart confirms that a superannuation death benefit can include both the member’s super balance and insurance held through super.
This is another reason we encourage clients to check their actual superannuation arrangements when undertaking their estate planning.
Superannuation can be especially important for blended families
Superannuation deserves particular attention where family circumstances are more complex.
This may include:
- second marriages;
- blended families;
- children from previous relationships;
- estranged family members;
- financially dependent beneficiaries;
- beneficiaries with particular vulnerabilities; or
- an estate plan that deliberately gives different amounts to different beneficiaries.
In these situations, assumptions about where superannuation will go can potentially undermine an otherwise carefully considered estate plan.
Should I nominate my estate to receive my super?
Sometimes having superannuation paid to an estate may fit with a person’s overall estate plan. In other circumstances, a direct payment to an eligible beneficiary may be more appropriate.
There can also be important superannuation, taxation and financial consequences associated with different approaches.
And this is where we need to draw an important line between the work of your estate planning lawyer and the work of your financial adviser.
Important: Hemmings Legal does not provide financial or superannuation advice
Hemmings Legal provides legal advice about Wills and estate planning. We do not provide financial advice, financial product advice, investment advice or superannuation financial advice.
We can discuss superannuation in the context of your legal estate plan and help you identify where your Will and superannuation arrangements need to work together.
However, questions about matters such as your superannuation strategy, investments, taxation implications, financial products and what financial strategy is appropriate for you should be discussed with an appropriately qualified financial adviser.
This distinction matters because good estate planning can involve both legal and financial considerations.
Need financial advice? Why we trust Partners in Planning
When our clients need financial advice, we want them to be able to obtain that advice from professionals they can trust.
Partners in Planning is a financial planning practice that we know and trust.
One of the things we particularly value about Partners in Planning is their independence. The good news is that the financial advice they provide is genuinely independent, and that independence is one of the reasons we feel confident referring our clients to them.
You can learn more about why Partners in Planning is different or contact their team about superannuation and financial planning advice.
Hemmings Legal and Partners in Planning provide different professional services. Hemmings Legal provides legal advice; Partners in Planning provides financial advice. For clients who need both, those two disciplines can complement each other when putting a comprehensive plan in place.
A quick superannuation and estate planning checklist
If you are reviewing your Will, it is worth asking yourself:
- Which super funds do I have?
- What are the current balances?
- Do I have life insurance through super?
- Have I made a death benefit nomination?
- Is it binding or non-binding?
- Is it still valid?
- Who have I nominated?
- Does that nomination still reflect what I want?
- Does it make sense when considered alongside my Will?
- Have my family or financial circumstances changed since I made it?
You do not need to work out all the answers before seeing us. In fact, identifying what needs further investigation is part of the estate planning process.
Frequently asked questions about superannuation and estate planning
Does superannuation automatically go to my spouse when I die?
Not necessarily. Who can receive your super and who ultimately receives it depends on matters including superannuation law, the rules of the fund and any valid death benefit nomination.
Does superannuation automatically form part of my deceased estate?
No. Superannuation can potentially be paid directly to an eligible beneficiary instead of being paid into the deceased estate. The Australian Taxation Office provides further general information about superannuation death benefits.
Can I leave my super to someone in my Will?
Your Will alone does not automatically determine where your superannuation death benefit will be paid. Your super fund arrangements and any death benefit nomination also need to be considered.
What happens if I don’t have a binding death benefit nomination?
The outcome depends on the circumstances and your particular fund. You should check directly with your super fund and obtain appropriate professional advice.
Should I review my super when I update my Will?
Yes. We think this is an excellent time to check your superannuation arrangements, beneficiaries and insurance at the same time as reviewing your estate plan.
Ready to review your estate planning?
Estate planning is about more than simply signing a Will. It is about understanding what you own, how those assets are likely to pass and putting arrangements in place that reflect what you actually want to happen.
Hemmings Legal provides friendly, fixed-fee estate planning services from Bayswater North, assisting clients throughout Bayswater, Croydon, Ringwood, Heathmont, Wantirna, Boronia, Rowville and Melbourne’s eastern suburbs, as well as clients across Victoria by video appointment.
You can view our estate planning services and fixed fees or learn more about what to expect when meeting an estate planning lawyer.
Book an estate planning appointment with Hemmings Legal
You don’t need to have everything worked out before your appointment. We will guide you through the legal estate planning process and let you know when an issue would be better addressed with your accountant, super fund or financial adviser.
Hemmings Legal provides legal services and does not provide financial product, investment or superannuation financial advice. This article contains general information only and is not legal or financial advice. Advice appropriate to your individual circumstances should be obtained before making legal or financial decisions.
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