Gone are the days when most people simply had a home, a bank account and possibly a few shares, and could confidently go to their neighbourhood lawyer and ask for a simple Will to be prepared. The introduction of capital gains tax 30 years ago, the increasing importance and complexity of superannuation and the increasing complexity of family and personal situations have made this simplistic approach outdated and very unwise.
Just one example is the complexity of the superannuation rules which apply when a person dies. Combine this with the myriad factors which a Will must now take into account, and confusion is the natural result. Today, the advice of an experienced estate planning lawyer is essential.
Superannuation is one of the most valuable assets that we own.. Yet, we find that there is a lot of confusion around it! Superannuation is a somewhat unique financial creature, with its own particular rules and regulations. In a sense it has a life of its own. Without careful steps being taken, superannuation cannot be controlled by your Will and may end up passing to somebody you did not intend to benefit from it if you die.
Your basic choices for the disposal of your superannuation on your death are:
- Leave the discretion as to who should benefit to the trustees of the superannuation fund (who may be a financial institution, trustees of an industry superfund, or your family controlling your self managed superannuation fund after your death);
- Make a binding death benefit nomination, which compels the trustee of the fund to either pay the benefit to a qualifying person nominated by you, or to your estate (so that your will can direct who receives it).
Some particular points of confusion which arise are:
- Confusion between a binding and a non binding nomination. Only a binding nomination compels the trustee to pay according to your wishes. A non binding nomination simply gives a trustee an indication of what your preference is, but the trustee still must make its own decision.
- Confusion about how to word a binding death benefit nomination.
A recent Queensland Supreme Court case has highlighted how tricky this can be. A superannuation member with legal training intended that the death benefit be paid to his estate, but used wording which did not technically comply with what the superannuation trust deed required in order to nominate an estate. The Court held that the nomination was invalid.
The effect of this was that his wife of a second marriage was able to receive the whole of the superannuation death benefit, whereas if the nomination had been correctly worded it would have gone into his estate and his will would have passed to the children of his first marriage.
All of the above highlights how important it is to obtain experienced, professional advice from an estate planning lawyer about all aspects of planning for contingencies such as death and incapacity.
Contact a member of our Estate Planning Team if you require any assistance or would like to book a time for a Will Review.
Peace of Mind is not overrated!