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You’ve spent your whole life working hard and socking away money into your superannuation fund and ended up with quite the tidy nest egg once you left employment. Or perhaps you’re still working hard now and wondering how much super you’ll need to retire with. If you budgeted for more than what you end up spending, or your life is unexpectedly cut short, you’re no doubt wondering *what happens to my super money when I die?
Can I leave my unused superannuation in a will?
Although no-one really wants to think about what happens after you leave this earth, it’s important to consider who you want your unused super money to go to when that day comes. Unfortunately, your will may not be enough to make sure your hard-earned retirement savings end up in the right hands.
Many people do not realise their super is treated differently from their other assets when they pass away. Unlike other assets, it’s not automatically treated as part of your estate (this being your net worth, so the total value of your bank accounts, home, car etcetera). However, often it will be one of the biggest assets you’re able to pass on to your loved ones. This is why it’s so important to be specific about who your wishes and make sure you provide this information to your super fund. So how do you do this? Enter the binding death benefit nomination.
What is a binding death benefit nomination?
You may be able to avoid potential issues (such as loved ones fighting over your unused super or it getting tied up in government red tape) by completing a binding death benefit nomination. This means the trustee of your super fund must pay your death benefit to the beneficiaries (aka loved ones) you have nominated and in the proportions you specify. For example, 50 per cent of your remaining superannuation savings would go to your husband and the other 50 per cent to your son. Check your super fund has this option and ask them how you can get the appropriate paperwork.
You then need to decide who to nominate. This can be more than one person but you’ll need to specify how you want it divided. There are rules about who you can nominate. It has to be someone who is either financially dependent on you, such as your current spouse (this includes same-sex de facto partners) or child. It can also be someone in an interdependent relationship with you – this is where you share a close personal relationship, live together and one or each of you provides the other financial and domestic support and/or personal care. If you’re worried the person you want to nominate doesn’t meet the criteria, it’s worth asking your from your fund for advice.
“Your nomination is not checked until after you have passed away, and if you nominated a wrong person the nomination is invalid,” warns Louise Biti, director of Strategy Steps, an independent firm specialising in the development of financial planning. “If you want the money to go to someone who is not an allowed beneficiary you could nominate your estate and provide instructions in your will.”
It’s really important to review your nomination regularly. “Most binding nominations need to be renewed every three years or they lapse,” says Biti. “It might be easier to diarise a renewal every year, perhaps on July 1 or when your super statement arrives.” She says you should also review it if your circumstances change, for example if you get married, have a child or separate otherwise that person will still be able to stake claims on your unused super cash, despite you wishing otherwise.
